Italy on the Brink

Jacob Laksin is a senior writer for Front Page Magazine. He is co-author, with David Horowitz, of The New Leviathan (Crown Forum, 2012), and One-Party Classroom (Crown Forum, 2009). Email him at jlaksin@gmail.com and follow him on Twitter at @jlaksin.


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An embattled prime minister struggling to hold the government together. Rocketing public debt. An economy on the brink of collapse. That may sound like a description of Greece, the most recent sick man of Europe, but it sums up equally well the dire political and fiscal realities facing Italy, where the government of Silvio Berlusconi this week was clinging to power as the country’s debt crisis spiraled out of control.

It would be difficult to overstate the extent of Italy’s problems. Although the third largest member of the Eurozone, Europe’s 17-member economic and monetary union, Italy appears headed for a Greek-style financial calamity. Weighed down with a runway public debt of $2.6 trillion, a figure more than 120 percent of GDP, Italy has indulged in a massive borrowing spree. Now the borrowing has reached danger levels. Borrowing costs, as measured by Italy’s interest rates, rose to 6.67 percent this week, the highest since the euro was established in 1999. For some perspective on that number, consider that it is around the same level that forced Greece, Ireland, and Portugal to seek bailouts from the European Union and the International Monetary Fund. Alarm is growing that Italy could be the next country to need rescuing – a strain that, given the size of Italy’s economy, would almost certainly overwhelm the other Eurozone countries and send shockwaves throughout global markets.

Italy’s current troubles are a long time in the making. Financial analysts have long urged the country to overhaul its rigid labor market, which makes it difficult to hire and fire workers. That in turn contributes to high unemployment, particularly among the country’s youth, and stalls economic growth. Combined with Italy’s plunging birth rates, the effect is to tilt the ratio of pensioners to workers heavily toward the former. By some estimates, Italy’s retirees will actually outnumber its active workers by 2030. The future looks as bleak as the present.

Resolute action does not seem forthcoming, however. Partly out of fear of the country’s powerful government labor unions and partly out of a refusal to undertake unpopular reforms, successive Italian governments have done little to change the status quo. Berlusconi has been no exception. Forced by market pressures, his government passed a modest austerity package in August, but there is no evidence that it has the will or the political support to implement it. Due to defections in his party, Berlusconi does not have the backing needed to pursue reforms. It is not even certain that Berlusconi will be around to see them through. This week he barely survived a no-confidence vote in the Italian parliament, and it is now clear that he does not command a majority. With his control slipping, Berlusconi is largely powerless to enact required reforms quickly.

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  • davarino

    This is like the passengers of the Titanic fighting to keep the crew from saving the ship. They know they are going down and yet fighting to keep all the perks that are sinkinig their nation.

    Enjoy it while it lasts

  • StephenD

    It is almost like the world is getting ready to return to feudal Fiefdoms and Monarchs. Would Italy be better off with the Papal States dealing with the King of Milan and Florence? Negotiating one Royal with another? How about France and Britain…should Kingdoms be re-established?
    Are we ready for a king?
    Eventually, when the entitlement monies run dry, someone will have to step in and demand order. At that instant we are no longer citizens but rather we will have become subjects.
    In the name of peace, all hell will break loose.

    • Larry

      Not another King, but Italy would be much better off getting rid of the old Kingdom of Naples. The south has been a net drain on central and northern Italy since reunification.

  • Lightning Jack

    Welcome to the inevitable socioeconomic realities of Euro- Socialism and its collectivist cradle to grave welfare system. Throw in blatant union totalitarianism and thuggery which precludes even modest austerity correction measures and Italy's economic fate is sealed.

    Inevitably any state which spends too more public money and allows its wage cost to become uncompetitive will experience rising unemployment and falling economic activity. its social cost will become impossible to bear.

    Are the big government "Shack Daddy's" in the Obama camp and Congress paying attention?

    • R Eskola

      Well said. The good thing is that Italy might finally bring down the Euro with it. It might even start the dissolution of the whole EU.

  • Oleg

    Italy has a few things going for it that Greece does not have, it actually produces things like cars, electrical goods, clothing, shoes, etc., that people elsewhere in the world want to buy? What has Greece produced other then wine, ouzo, olives and big government? Italy also has a tradition of democratically elected and peaceful transition of government, dysfunctional as it is, Greece had a military junta running the country 40 years ago and a string of corrupt professional politicians running the country since who shovel money off the backs of trucks to keep in power. Italy needs a major overhaul and reform but can be fixed, Greece needs to be torn down and completely rebuilt from the foundation up.