08 December 2016

Eurexit

Change and renewal? Non, merci. Stagnation and decline? Si, per favore.

by Neil Tidmarsh

Goodbye Hollande, goodbye Renzi; and goodbye to Europe’s prosperity and global influence?  Both leaders came to grief by proposing change and reform which their citizens roundly rejected; but without those changes and reforms, the possibility of Eurexit (the departure of Europe, as any kind of significant presence, from the world stage) becomes ever more threatening.

Italy – the Eurozone’s third largest economy – is in a fragile state.  It has suffered a triple-dip recession, shrinking by 8% since 2008; the IMF estimates that it won’t regain pre-crash levels until the 2020s.  The government owes €2 trillion, which gives it the second-highest ratio of public-debt to GDP in Europe (Greece has the highest).  Unemployment is at 11.4%.  Youth unemployment is at 39%. Italian banks are carrying toxic debt of 360 billion euros.

Prime minister Renzi vowed to reform his country’s economy by making it more agile and competitive, but soon realised that his attempts to free it from stifling red tape and restrictive practices were doomed without political reform; he found it impossible to get anything done in parliament. (And it wasn’t just his attempts at economic reform which were held up in parliament; his attempts to reform justice and healthcare were held up there, too).

“The characteristic condition of Italian political life is the complex stalemate” says Tim Parks, the novelist and commentator on all things Italian.  The use of ‘veti incrociati’ – ‘crossed vetoes’ – is a traditional tactic to prevent your opponent from achieving anything; but by cancelling out any initiative it also prevents anyone from achieving anything in Italian politics.  Politics becomes a horse-trading business where the aim is simply to hold on to power rather than to do anything constructive with it.  For decades, it has seemed that Italian politicians have been too busy jockeying for power – governments come and go, coalitions form, dissolve and reform with bewildering rapidity – to actually get anything done for the country.

Renzi’s proposals to reform the upper chamber were an attempt to break this paralysis.  Since the defeat of Mussolini, Italy has had a bizarre system whereby both houses have more or less the same function and power – checks and balances imposed just in case another Mussolini was waiting in the wings.  Renzi’s measure sought to more or less abolish the Senate as an elected chamber and to restrict its ability to veto legislation, in other words to turn it into the kind of second chamber found in other European systems.  Hardly the attempt to give his government dictatorial powers which his opponents claimed, it would have enabled effective government, which in turn would have enabled the necessary changes and reforms to get the country’s economy back on its feet.  As a bonus, it would also have told the rest of the world that Italy was ready to be trusted with a mature and efficient system, to govern itself without the checks and balances which have stabilised but hobbled it for the last seventy years.

Real change, and necessary change.  But this weekend’s vote indicated that the people of Italy do not want change.  So it seems that economic stagnation and political paralysis will continue.

The French economy – the Eurozone’s second largest – is also in dire straits.  Unemployment is at 10.3% and rising; youth unemployment is at 25%.  Public spending is at 57% of GDP, among the highest of any developed country.  President Hollande initially tried to tackle the situation with traditional Socialist methods such as high taxation.  Only when these failed did he attempt anything like the structural reform which Renzi was proposing – changes to the red tape, restrictive practices and high taxation which are stifling growth in France as they are stifling it in Italy.  He was no more successful than Renzi. The unions more or less declared war, strike after strike brought the country to a halt, and students and schoolchildren staged round-the-clock ‘nuit debout’ protests, in what seems in retrospect to have been the kind of populist uprising with which we are now all too familiar.  His attempts ended in humiliating failure.

It seems that France, like Italy, does not want change.  Francois Fillon is promising Thatcherite reforms if he becomes president next year, and both Manuel Valls (who is likely to win the Socialist leadership vacated by Holland, and who was behind Hollande’s belated and failed attempts to change the labour laws) and the independent Emmanuel Macron (En Marche!) are presenting themselves as reformists; but none of them is likely to be any more successful than Nicolas Sarkozy, who also tried to be France’s Thatcher but failed completely, or Hollande himself.  The unions were quick to threaten a revolution as soon as Fillon won the Republican leadership and promised to reduce public spending by 100 billion euros, scrap 500,000 public sector jobs and curb healthcare spending if he became president.

At this point, fundamental differences between last June’s UK referendum result and this week’s Italian referendum result should be obvious.  Commentators have been quick to lump the two together, but they are mistaken.  The results are complete opposites.  The Italian vote was a rejection of change; the UK vote was a vote for change.  Radical change.  Change so serious that any number of legal experts are telling us that technically it might not even be possible. Renzi was rejected because he wanted change; Cameron was rejected because he wanted things to stay the same. The two results are nevertheless related; many in the UK must have voted Leave out of fear of the Continent’s unwillingness to embrace necessary change, fear that this unwillingness is dooming the rest of Europe to stagnation and decline. Thank goodness we’re cutting free from all that, some might say.

But this is not the place or time for schadenfreude.  European decline would be bad for everyone. Not only would it be disastrous for all of Europe (yes, that does include the UK – we remain a European country – a vote cannot change the hard facts of geography and cultural history); it would be disastrous – culturally, economically and politically – for the rest of the world.

Last August, reports of Italy’s looming banking and economic crisis coincided with reports that Italy’s wild wolf population is getting dangerously out of control – a metaphor which Shaw Sheet couldn’t resist (see Wolf at the Door, 04 August 2016). This week, Hollande’s admission of failure and his decision to call it a day also coincided, somewhat uncannily, with reports that France’s wild wolf population is getting dangerously out of control. (“The wolf is at the door of Paris” declared Jean-Luc Valérie, chairman of L’Observatoire du Loup, an association of 15 scientists.) It just goes to show that the best metaphors can take on a life of their own.

 

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