Roughly 2,500 years ago, there lived a brilliant, silver-tongued, but by most accounts, ruthless and egomaniac man. A man who betrayed his country twice. (He was pardoned for his first betrayal!) A man who wanted so much to be the center of the world at all times, that when no one had anything to say about him, he cut the tail of his dog, just in order to make people talk about him again. (Although some historians claim that he did so because everyone was gossiping about him and his decadent life, and so he wanted to distract them by giving them something else to gossip about.) His name was Alcibiades.
Modern Italy reminds me of Alcibiades.
A country with so many merits, a country that could be at the epicenter of European politics. A country that could be a financial role-model for the smaller countries of the Eurozone. But it’s neither. And that’s because Italy has chosen to let itself become the victim of its own worst attributes. No, I am not claiming that Italians are ruthless like Alcibiades, by they do seem to become more and more egomaniac. They do seem to enjoy the attention!
I cannot explain otherwise of Italy’s insistence of shooting itself in the foot by submitting a budget that assumes increased public spending and deficits, but lower debt reduction velocity. Although the Italian government later revised its growth forecasts somewhat downwards, the complete disregard they had initially shown towards the budgetary recommendations coming from the Commission, in conjunction with the Deputy Prime Minister Matteo Salvini’s bellicose rhetoric towards Brussels “[…] Junker and Moscovici have ruined both Italy and Europe.” are worrisome indicators that those at the helm of the country may not fully realize how sensitive Italy’s (and indeed, Europe’s, as the country is just too big to save) economy is, to external shocks.
Italy currently sits on the second largest (EUR2.6t) public debt pile in the Eurozone, created after more than 20(!) years of constantly running budgetary deficits.
Technically speaking, a high debt ratio isn’t a problem in and of itself, so long as you can keep repaying it. But the more the debt, the more sensitive you become to external shocks, because a small increase in the interest rates can be enough to derail an otherwise balanced budget. And the more unstable you appear on the inside (Salvini’s statements of trying to persuade Italians that it’s all the others’ fault) the greater the chance for that external shock to kick in.
I do not believe that the Italian government live in “la la la” land where unicorns are abound, but I do believe they are severely lacking in the leadership skills that a country with so many problems needs.
Brace yourselves fellow Eurozone citizens: We are all together on the same roller coaster ride, but one of the biggest wagons about to fall off the tracks pulling us all down with it. And as if that wasn’t enough, the roller coaster has a bunch five-year-olds responsible for its compliance to health and safety regulations…