Courtesy Reuters

Can Mario Monti Rescue Italy?

The Need For Immediate Reform

Since the worldwide financial crisis began in 2008, economists have been predicting the nightmare scenario that now seems to be unfolding in the European Union: a domino effect, as the economies of Greece, Ireland, Portugal, Spain, and Italy (the PIIGS, as they've come to be known) collapse. Yet most observers got the ordering wrong. The crisis arrived in Italy before it arrived in Spain. The reason is political. Spanish Prime Minister José Luis Rodríguez Zapatero, realizing that he had lost the backing necessary for difficult reforms, announced last April that he would not run for re-election. Italian Prime Minister Silvio Berlusconi, who faced similar economic challenges, tried to keep his seat. He lost that battle and resigned on Saturday, after having let the Italian economic crisis fester for months.

The Italian public shares some of the blame. For 17 years, it put up with a leader who had managed to collect an impressive record of criminal proceedings (for corruption, bribery, complicity in prostitution with a minor, Mafia connections, false balance sheets, false testimony) but went acquitted for all of them. La Repubblica, Italy's largest daily, argued that many Italians, including Berlusconi himself, had been living in a some kind of national Truman Show, fabricated by the television stations that Berlusconi himself owned. In his last press conference as prime minister, for example, Berlusconi noted that "Italians are not feeling the crisis -- restaurants are full and flights to exotic destinations are overbooked."

European financial markets have also been caught sleeping. Fifteen years ago, when Italy joined the eurozone, the risk associated with Italian debt plummeted, which meant that Rome could borrow much more cheaply. Even so, the Italian government engaged in a few years of fiscal restraint, including undertaking deficit and debt reductions, but the availability of cheap money proved too tempting. The country went on a decade-long borrowing spree. Thanks in part to Italy's spending and in part to the global recession, this year the country's debt totaled some 120 percent of

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