La bomba Britannica

2 July 2016

9:00 AM

2 July 2016

9:00 AM

In Italy, media coverage of the triumph of Brexit has been wall-to-wall as Italians worry about the collateral damage and wonder if they too dare…

So far La bomba Britannica has hit the Milan stock market much harder than the London one. On Friday, Milan fell by 12 per cent against the FTSE-100’s 3.5 per cent.

Italy’s banks — too numerous, too small, undercapitalised and saddled with alarming levels of toxic debt — took the biggest hit. New eurozone rules that ban government bailouts for big depositors have turned them into sitting ducks. Shares in Monte Paschi di Siena (bailed out once already in 2013 by Italy’s central bank) fell by more than 13 per cent. In the past six months, Italy’s banks have lost 56 per cent of their share value.

But there was good news for Italian clam fishermen and restaurants specialising in spaghetti con le vongole: at long last the European Commission has agreed to increase the permitted minimum size of vongole by 3mm to 25mm.

But the economic situation in Italy at the dark heart of the eurozone remains bleak and the urge to get the heck out grows. As the front-page splash of the anti-EU Libero newspaper proclaimed last Friday: ‘May God Pour Profuse Blessings On the English: the great democracy on the other side of the Channel teaches the whole Continent how it should treat its citizens.’

That is a pro-British rewriting of the exhortation of the second world war fascist propagandist Mario Appelius, who ended each transmission by telling listeners: ‘Dio stramaledica gli inglesi.’ (Let God Pour Profuse Curses on the English.’)

As Libero editor Vittorio Feltri commented: ‘It’s written in the history books and also in the news: the only true functioning democracy is the English one… The United Kingdom has provided proof for the umpteenth time that it believes in the will of the people and that it knows how to respect it with elegance.’

Since the great banking crash of 2007 - 08 there has been a slow-motion volte-face in the Italian attitude to the euro and the EU. According to an Ipsos-Mori poll in May, the Italians are now the most hostile to the EU after the British: 48 per cent of them would vote to take Italy out of the EU in a referendum, compared with 41 per cent of the French and 34 per cent of the Germans. Italians used to be among the most Europhile people in the EU. They were much more relaxed about being governed from abroad; perhaps not surprising given their own track record. Since the fascist dictator Benito Mussolini fell from power, Italians have lived under 63 governments whose insatiable appetite for political corruption would shock the Devil himself. So they sleep-walked into the single currency and handed over monetary sovereignty to the Fourth Reich — I do beg your pardon — to the EU.

But when the lira was replaced by the euro, Italians kissed goodbye to la dolce vita.Prices went through the roof while wages remained static, and the economy stagnated until it went into recession after the global crash. Silvio Berlusconi, the media tycoon, who was forced to resign in 2011 after a coup orchestrated by Brussels and Berlin, was Italy’s last elected prime minister. Since then there have been three.

Not surprisingly the Italians are nowadays very angry about being members of a eurozone which has deprived them of the power to devalue or set interest rates, and which, whether deliberately or not, benefits no one but the Germans. And this anger is beginning to find political expression.

Italy’s second largest party is the populist MoVimento 5 Stelle, founded in 2009 by the comedian and demagogue Beppe Grillo, which says it wants a referendum on both the euro and the EU. In regional elections this month, Grillo’s candidates were elected mayor in Rome and Turin. The party now looks set to defeat Prime Minister Matteo Renzi and overtake his ex-communist Partito Democratico as the largest in parliament.

Nicknamed Il Rottamatore (the demolition man), Signor Renzi talks non-stop about how his reforms have rebooted the Italian economy. But the 41-year-old Florentine is the political equivalent of a Latin lover: all mouth and trousers. When he came to power in February 2014, his motor-mouth talk swept the gullible right off their feet. The Economist and the Financial Times were among his biggest fans.

That honeymoon period has ended and Italy’s economy remains a basket case — surely because it is being held prisoner by the euro. Last year, in evidence to parliament, Banca d’Italia said that Italy’s ‘profound and prolonged crisis’ began in 2007. Since then, says the bank, the proportion of Italians living in absolute poverty has more than doubled to 7 per cent (4.2 million people). This is far more than any other major EU country. If you take out the 1 per cent of GDP generated by prostitution and drugs — included in GDP calculations thanks to new EU rules — the eurozone’s third-largest economy has been in continuous recession since 2008.

Even with hookers and pushers included, Italy’s GDP grew by only 0.7 per cent last year and it is forecast to grow by little more. Italy’s public debt as a percentage of GDP is now 132 per cent — the fourth highest in the world (in the EU, it is eclipsed by Greece) — compared to 103 per cent in 2007. Inflation in Italy was 0.1 per cent in 2015 and the forecast is for 0.3 per cent this year. The spectre of deflation haunts the stage, as does that of the collapse of the banks, which hold a total €350 billion of bad debt, worth 17 per cent of GDP.

There is, though, little Signor Renzi can do, thanks to the euro, except bluster and blag about how he has ‘restored international credibility’ to Italy. The official unemployment rate remains stuck at around 12 per cent. But the real rate is at least 15 per cent, because about half a million Italians are in cassa integrazione (paid up to 80 per cent of their wages not to turn up to work for up to 12 months at a time).

Renzi may boast that unemployment among 15-to-24-year-olds has gone down from 44 per cent last year to 40 per cent. But so what? In Germany it is 7 per cent. The situation in southern Italy, where per capita GDP is barely half that in the north, is positively Third World. Little over half of Italians aged 15 to 65 are ‘economically active’ — the smallest proportion in the EU. What, I wonder, do the other 44 per cent of working-age Italians — 14 million of them — do all day? Surely they cannot all be working in the black economy.

But despite this dire state of affairs, it would be much more complicated for Italy to leave the EU than Britain: for it would mean untangling itself from the euro, which seems an impossible task.

The post La bomba Britannica appeared first on The Spectator.

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