Come in Mr Berlusconi, your time is up!
And so Mr Berlusconi, with his car salesman smile and his suspiciously dark hair, has gone, he has been an absolute gift too to the satirists; Italy I doubt, will dwell too much on his resignation. As Hugh Denis said on Friday night’s ‘The Now Show’ on Radio 4, how can you put much trust in a man who had to endure 53 confidence votes since 2008? Clearly investors did not have a great deal of faith in the man; one only has to look at the eye watering 7% interest on government loans and the frenzied activity on the market to see how uncertain people have been about the Italian economy. With similar events witnessed in Greece earlier this week, with the exiting on George Papandreou, and with it looking increasingly likely that Mario Monti will succeed Mr Berlusconi, it is entirely possible that we bear witness to dawning of a new era for the Technocrat. Some readers may recall that I suggested that Berlusconi went months ago, I only wish that my spooky ability to predict events in Italian politics was transferable to the Eurolottery!
Italy’s sovereign debt is up around the 1.7 trillion Euros mark, an incredible sum which not only puts it as one of the highest in Europe, but also one of the highest in the world. Grant Aymot, co-author of “The End of the Berlusconi era?”, highlighted a lack of reform and innovation; “All the world has become more competitive…Italy’s economic and state structures needed to be reformed, and it hasn’t been done. That’s the real problem: Stagnation is the word I would use to describe the impact of Berlusconi’s rule.” Arguably therefore Berlusconi’s lasting legacy will be, not only a country that is crippled but monumental levels of national debut, but also an infrastructure which will have to undergo a painful and rapid change in order to ensure that Italy can honour her creditors. Should Mario Monti accept President Napolitano’s invitation to form a government, he will have a Herculean task on his hands. Not to mention the unpopularity he will almost certainly have to endure as he implements the very necessary austerity measures which Mr Berlusconi was never able to pass.
Monti’s potential problems are similar to those of the new Greek PM Lucas Papademos, although admittedly the task of implementing austerity measures had already started under Papandreou. Papademos has excellent credentials for the task of turning the Greek economy around; vice-president of the European Central Bank, Chief Economist to the Bank of Greece, he even assisted in the Greek transition to the Euro. Who better to help the country to get itself out of the mess the Euro has undoubtedly exacerbated, than the man who helped get them into it! He naturally does not see the Euro itself as a factor in Greece’s current plight, “I am convinced that the participation in the euro is a guarantee of monetary stability and a factor of economic stability,” he told journalists shortly before forming a new government. For the sake of Greece I sincerely hope he succeeds where Papandreou failed, an important test of his abilities will be to see of he can persuade the EU and the IMF to release some of the funds from last years bailout agreement to ensure that Greek workers can actually get paid!
What does all this mean to Britain? Well with two of the shakiest European economies under new management it may be that confidence in the Eurozone may gradually restore, and Britain might potentially avert the ‘double-dip’ that David Cameron mentioned earlier in the week. Despite the crisis, British exports to Europe have increased significantly in the past year. Italy and Spain have recently invested greatly in Britain, and the Chancellor would no doubt like this to continue. The question remains however, whether Monti would continue with this investment at a time when he has to make harsh cuts to the Italian domestic budget. There is no guarantee that the events of this week are a turning point of the Eurozone, and it is still in an incredibly precarious position. It is just as well therefore that the British government is erring on the side of caution and is drawing up a contingency plan should the Euro start of unravel.
Posted on November 13, 2011, in Comment, Foreign Affairs and tagged britain, david cameron, eurozone, George Papandreou, greece, italy, Lucas Papademos, Mario Monit, silvio berlusconi. Bookmark the permalink. Leave a comment.