Anyone who had swallowed the line that the European crisis is under control and the situation is gradually improving had their illusions destroyed by the Italian elections on Sunday/Monday. The Italian people succeeded in highlighting the fundamental issues that threaten not just EMU (the European Monetary Union, ie the euro, the European Central Bank (ECB) and the other monetary apparatus), but the entire European Union (EU) and the European project that underlies it.
It is essential to differentiate between these two levels of the crisis, although they are of course closely intertwined. At the immediate level, the issues are financial and economic and the responses are measured in the financial markets. The election result, which apparently surprised the pundits, was that the parties in favor of maintaining the policies of austerity and reform demanded by the EU leadership in Brussels, the ECB in Frankfurt and the German government in Berlin, failed to win a majority in both houses of the Italian parliament. Indeed, no functioning coalition seems to be possible, given the distribution of the seats (which is not at all the same as the distribution of the votes, because the Italian system awards a massive bonus in the lower house to the party with the most votes). This has caused the markets understandable unhappiness, with Italian share prices dropping sharply and the yield on Italian government bonds rising.
However, this market reaction – which initially encompassed the whole of Europe and affected the entire world — has been tempered by the calming words and deeds of the European establishment. The auctions of new Italian government bonds this week went smoothly, although much higher yields were needed to sell these bonds compared to the previous such auctions a few weeks ago. It seems that two big Italian banks hovered up most of the longer-term offerings – which is the kind of manipulative intervention that is now standard behavior in government bond markets around the world.
In other words, the markets can be kept under control by the governments and central banks. The problem is not the markets, but the people. The Italian elections were a fair and free democratic exercise, in which the various parties and what they stood for were well understood. One major bloc of parties was led by Silvio Berlusconi, about whom no-one can pretend to be unaware, whether it is of his orgies and other personal behavior, or of his ownership of major media outlets and use/ abuse of them to promote his own political career, or of the criminal charges hanging over him, etc. etc. Nevertheless, large numbers of Italians voted for him, for the third or fourth time.
Worse still, from the point of view of the European establishment that had effectively deposed Berlusconi in late 2011 and replaced him with its own hand-picked technocrat, Mario Monti, was the sweeping success of Beppe Grillo’s Five Star Movement, which was a pure protest movement. It opposed not just the mainstream Italian political parties and their corrupt practices, but also the EU-inspired policies of government-led austerity, socio-political reforms and the huge changes to Italian lifestyles that would result from the implementation of these reforms.
In other words, the fundamental issue at stake is not Berlusconi the person or Grillo the symbol. The issue is the clear-eyed and decisive rejection, by the majority of the Italian people of the dictates of the EU/ ECB/ German (and IMF/ US) axis. What happened on Sunday was a direct clash between democracy, in the sense of the exercise of free choice by an electorate, and between the European ideal of shared responsibility, as enshrined in practice by the European institutions.
The Italian people were supposed to vote for what is considered to be good for them by the European establishment. Even if they would not do so from altruistic identification with the European ideal, they should have done so out of self-interest, because their European partners will not save them from their own follies if they do not accept the demands of their would-be saviors. Instead, the majority of Italians chose to demonstrate just how wide the gulf is between the peoples of Europe and the European leadership elite. In normal political terminology, this behavior is called a revolt – but because it was conducted via the ballot box, it has impeccable democratic credentials, even if they are called ‘Berlusconi’ or ‘Grillo’.
That is the essence of the European crisis and, far from getting better and fading away, this week it got a whole lot worse.