Anti-austerity forces grow in Italy after Greece vote

In southern Europe, popular opposition has been mounting against the fiscal austerity measures demanded by Germany.

Italian Prime Minister Renzi talks during a news conference with his Greek counterpart Alexis Tsipras at Chigi palace in Rome
Italian Prime Minister Matteo Renzi during a news conference with his Greek counterpart Alexis Tsipras at Chigi palace in Rome [Reuters]
Rome, Italy – After the left-wing Syriza party notched an impressive victory in Greece’s recent parliamentary elections, a gust of energy has swept across debt-laden southern Europe, which has borne the brunt of the eurozone’s fiscal crisis.

In southern Europe, popular opposition has been growing against the fiscal austerity measures demanded by Germany, the economic anchor of the eurozone. In Spain, tens of thousands of people protested against welfare cuts on January 31, in rallies led by left-wing movement Podemos – which in just months has rocketed from obscurity to lead the opinion polls for Spain’s elections this year.

Meanwhile, in Italy – which, like Greece, suffers from a stagnant economy, high debt, and an astronomical youth unemployment rate – Syriza’s victory was met with supportive but tempered statements from centre-left Prime Minister Matteo Renzi.

With a debt load that stands at 132 percent of its GDP, Italy may find that Syriza’s victory in Greece will help it in its own economic negotiations with the European Union. If Italy were to team up with Greece and other debt-strapped eurozone countries such as Portugal and Spain, analysts say, they could pressure the EU to ease austerity measures and adopt more fiscally expansive policies – which could in turn restart economic growth.

Generation austerity

At a joint press conference on February 3, Renzi seconded incoming Greek Prime Minister Alexis Tsipras’ demand for a more lenient bailout agreement for Greece. “The conditions exist to find an accord with the European institutions,” said the Italian prime minister, while assuring that he would lend “bilateral cooperation” to any dialogue.

“A Tsipras government gives other leaders, particularly Renzi and Hollande, strong support in their negotiations with [German Chancellor Angela] Merkel to loosen the purse strings,” explained Luca Fantacci, an economist and the author of Saving the Market from Capitalism. “And this is beneficial not only for Greece, but for the whole eurozone – which is being choked by austerity.”

Since last November, both Italy and France have been pushing EU institutions for fiscal expansion. Meanwhile, both countries have been breaching the eurozone’s Growth and Stability Pact, which requires member countries to keep budget deficits below 3 percent of their GDP.

“In strictly economic terms, there is a widely shared view that expansionary fiscal policies are in the interest not only of Greece, but of Europe as a whole,” Fantacci said. “The problem [for Italy and others] is how to make them politically viable. It shows that the current form of the monetary union is untenable.”

Roberta Carlini, a Rome-based journalist who specialises in Italian politics, agreed that Italy’s centre-left government could take advantage of Syriza’s victory in Greece. “Renzi should be trying to get EU to soften austerity measures. At home, we need massive public intervention in the economy that has been on a long decline,” she said.

Can Italy reform at home?

But even if the EU were to adopt a more expansionist fiscal policy, analysts say Italy’s economic problems run deeper. In order for Italy’s economy to be revived, some say, it will have to crack down on political favouritism and protected economic sectors – in which it is nearly impossible to fire employees with career positions, and in which salaries and benefits have remained the same despite Italy’s economic malaise.
“Many reforms are required in the interest of social justice, sound budget and competitiveness: streamlining bureaucracy, improving education, stopping tax evasion, and so on,” said Fantacci. “But building this credibility requires governments that can keep their commitments.”

This would likely be a daunting task for Renzi and his weak governing coalition. Since taking office, the prime minister has had to perform a delicate balancing act: placating Silvio Berlusconi’s People of Freedom Party in order to secure its support for electoral reforms, while maintaining support from the left wing of his coalition government.

The recent election of a new Italian president, Sergio Mattarella, represents a significant victory for Renzi – who backed Mattarella in the face of opposition from Berlusconi’s party. And given that Renzi’s pact with Berlusconi now appears to be severed – if not fully broken – the left wing of his coalition could now become more influential. Nevertheless, this may not be enough to ensure that sweeping domestic reforms would pass.

Italy versus Greece: Creditor to debtor

Though Renzi and Tsipras share some similarities – for instance, both are the youngest prime ministers in their respective countries in more than a century – their political outlooks are sharply different. Tsipras has demanded that the EU give Greece breathing space so that its economy can recover, and snubbed Merkel during his tour of Europe. Renzi, meanwhile, has promised to build Italy’s “credibility” as the foundation for change, and wooed Merkel during a recent trip to Florence.

“Italy’s governments – the current and the past – have never dared to break the pacts that rule [the] EU, and have in fact made a point of their commitments towards credibility in financial markets,” noted Carlini. On domestic issues, “Renzi wants a market-led modernisation. He would never want to stop the privatisation programme nor rehire public workers.”

And Italy has a vested interest in Greece repaying its debt. Italy is the third-largest creditor to Greece, after Germany and France. Although Italian Finance Minister Pier Carlo Padoan acknowledged that “we have no interest in strangling our debtor and put his life at risk”, Rome does want Athens to commit to repaying its debts.
What’s more, Italy lacks a strong, left-wing party that could replicate Syriza’s success. Former senator and political commentator Antonio Polito – who was a member of the centre-left party La Margherita – explains that the recession has led to more divisive politics and the rise of right-wing, populist, eurosceptic movements in Italy. Meanwhile, a weak and fragmented left has largely followed the coalition government’s stance. “There is not much room for a movement of the extreme left like Syriza,” Polito told Al Jazeera.

Nichi Vendola, the leader of the Left Ecology Freedom Party – which is ideologically similar to Syriza – acknowledges this dearth of support. Nevertheless, he sees Syriza’s victory as a source of inspiration. “It is proof that a progressive political movement can win if it offers clear solutions to people’s needs and is based on social struggle for justice and dignity,” said Vendola, who is also the president of Italy’s Apulia province.
Although Vendola acknowledged that Greece owes large debts to Italian creditors, he stressed the importance of solidarity with other troubled eurozone countries. “We are creditors, but also debtors – and suffering the same consequences of the Greek, Spanish [and] Portuguese peoples.”
Source: Al Jazeera