Print version

Dying of Austerity. European democracies with their backs against the wall

07/05/2013, Rome

A crisis that does not allow for scapegoats, simplistic solutions or miraculous prescriptions. A crisis with political roots that can only be exited by assimilating the cultural changes that, in the third millennium, are involve the economy, geopolitics and institutions. A crisis that is rewarding countries with a sound welfare system, which are the winners of the moment because they’re managing to continue to guarantee a future for their young people.

Dying of Austerity. European democracies with their backs against the wall, the book written by Lorenzo Bini Smaghi and published by il Mulino, is a tough critique of the austerity measures adopted by European democracies. Initially written to provide a key for understanding the crisis for young American students, it has turned out to be equally useful for non-specialists.

The presentation of the volume, which took place in the Sala dell’autorità di garanzie della privacy, Piazza Monte Citorio, on May 7, was introduced by the director of the IAI, Ettore Greco, and moderated by Corriere della Sera editorialist, Antonio Politi. Speakers in addition to the author, former member of the executive board of the ECB and now senior visiting fellow at the IAI, were Giuliano Amato, former prime minister of Italy, Ivan Lo Bello, president of the Sicilian Confederation of Industrialists and Gaetano Quagliariello, Minister for Constitutional Reforms.

Lo Bello launched at appeal to Italian institutions: safeguard the country’s general interests by taking decisions that have a long-term projection, and coming to an agreement on the crucial questions in order to reduce the current structural weakness of Italy’s democracy. Furthermore, above and beyond the individual political coalitions, the political leadership should put more emphasis on education, as Germany did under Chancellor Gerhard Schroeder, realising its importance for the country’s economic growth.

In Bini Smaghi’s opinion, Italy’s competitiveness has not increased in spite of the labour market and pension reforms. Because of the incompetence of the political system and the weakness of Italy’s democracy, the country’s economic growth has been the lowest in Europe in the last ten years, according to recent OECD data. But its competitiveness could improve were Italy to open up to global trade, as Germany has done under Chancellor Angela Merkel.

“In addition to the recessive economic spiral, there is also a recessive political spiral”, stated Quagliariello. The rigour needed to avoid death by austerity is fuelled, not by the development and growth of the other European countries, but by ever more asphyxiating taxes in Italy. A ‘perverse spiral’ which is often flanked by a loss of public support for the leadership, which lacks a comprehensive long-term vision. This intertwining of politics and economics is at the root of the tremendous crisis that has hit the representative democracies that arose in the 19th century. Given that there is much less time for judgements to sediment because of television, social networks and opinion polls, politicians can no longer take long-term decisions for the good of their countries.

The countries that have ‘made it halfway’ must continue to “swim towards Europe”, asserted Amato, and the EU has to adopt anti-cyclical measures like the Fed in the United States, to prop up the economies of the member states without worrying about their competitiveness or paying their debts. Each economy in the eurozone has to solve its own problems and make itself competitive from the inside, while the Union has to aim at integrating the supranational bodies in order to increase the fiscal and economic powers needed to rebalance internal shocks.