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Could Italy tear Europe apart? Euroscepticism is running high as the EU abandons the beleaguered country to its pandemic fate

The Palazzo Senatorio building on the Capitoline Hill. Credit: Marco Di Lauro/Getty

The Palazzo Senatorio building on the Capitoline Hill. Credit: Marco Di Lauro/Getty


April 10, 2020   5 mins

Europe is heading into its most severe economic crisis for decades. Its two biggest economies — Germany and France — are already in freefall. Germany is contracting at its fastest pace since records began, in 1970, while in France you would need to return to the chaotic days of 1968 to find a slump that is broadly comparable what is unfolding right now.

But it will be in southern Europe, in countries such as Italy, where the worst effects of the health crisis will allow the worst effects of the economic crisis to really do some damage.

The numbers are terrifying.

This week, Goldman Sachs said that while it expects France’s GDP this year to decline by just over 7%, and Germany’s by 9%, Italy’s will slump by nearly 12%. The signs of the looming catastrophe are there. Italy’s manufacturers have just recorded their sharpest drop since records began.

More than four million businesses have shuttered. Tourism has ground to a halt. And, in a cruel twist of fate, it has been Italy’s most productive northern regions where the full force of the coronavirus pandemic has been felt.

Some analysts have argued that this contraction and crisis will be short-lived; that Italy will ‘bounce back’ later in the year. But this raises a difficult question: bounce back to what? The country has, essentially, lost two decades.

As the economist Ashoka Mody has pointed out, Italy has been in an economic coma ever since it joined the Euro more than 20 years ago. Economic growth has flat-lined and living standards have stagnated; Italians have now spent all of the 21st century in a slow or no growth trap.

The country was heading into another recession at the end of last year. And it had already gone through three in the past ten years, without ever having really recovered from the last crisis. Before Covid-19 hit, Italy’s economic output was still 5% below the peak that was recorded more than a decade ago.

This is one reason why, last year, the International Monetary Fund forecast that even by 2024 Italy’s output will still be lower than it had been in 2007. The country’s public debt to GDP ratio has ballooned; for each of the past six years Italy has owed more than 130% of its annual economic output, a figure that will now almost certainly surpass at least 150%.

Its financial system has remained weak, and there are still too many non-performing loans. The country, meanwhile, is grappling with one of the highest unemployment rates in the Eurozone which, at 10%, is basically what it was nearly a decade ago. Youth unemployment has been far higher — at nearly 30% —which is one reason why you hear so many Italian voices on the London tube.

In short, it is hard to make the case that the average Italian today is better off than when their country joined the single currency more than 20 years ago. Certainly, some of Italy’s problems predate its membership of the Euro: the poor education rates, ageing population, lack of industrial modernisation and heavy reliance on small family-run businesses have not helped.

But it is also true that Italy’s inability to breach Eurozone spending rules and invest seriously in its own economy has left it trapped in a doom loop. Which, in turn, has left Italians feeling frustrated, fed up and deeply pessimistic about their future. At the end of last year, 90% of the Dutch and 83% of the Germans described their economic situation as ‘good’. In Italy, it was 17%.

Italian enthusiasm for the European Union was also waning. Last year, as the Eurobarometer survey revealed, they were already among the least trusting of the European Union (only 38% trust it), were among the least likely to think positively about the EU (only 33%), were among the least likely to feel that their ‘voice counts’ in the EU (only 30%) and were among the least likely to feel satisfied with how democracy is working in the EU (only 45% did so).

Then, when Covid hit and Italians looked beyond their borders for help, European ‘solidarity’ was slow to appear — or did not appear at all.  Talk of unity, of learning from the mistakes of previous crises, quickly made way for nation-first approaches to closing borders and restricting the export of medical supplies.

Russia and China quickly filled the vacuum that had once again been left by the lack of leadership in Europe by sending supplies and workers.

When several states, including Italy, then asked their Eurozone partners to share debt, the more secure states in the north, notably Germany and the Netherlands, said no.  Anxious that a sharing of debt now might lead to the sharing of debt in the future, some in the north argued that financial assistance should come instead through the European Stability Mechanism (ESM).

But many in the south, shaped by the experiences of the past decade, and remembering the treatment of Greece, fear what strings will be attached to assistance. It is seen as a path to further austerity; last week, nearly half of all Italians rejected the idea of receiving help from the ESM because they see it as “a tool to impose Greek-style austerity”.

Meanwhile, the populist politician Matteo Salvini, who has been struggling in the polls, has taken full advantage of the situation. He’s now campaigning on the issue, stating simply: “No to the ESM”. Even if Salvini himself is not the beneficiary it is hard to see how Italy comes out of a renewed crisis with less rather than more populism. After all, it was the previous financial crisis that set the stage for the rise of both the ‘neither Right nor Left’ populist Five Star and Salvini’s League.

Their abandonment by the EU is clearly being felt by Italians as they sing to one another from their balconies. In recent weeks, nearly nine in ten said that the ‘EU is not helping us’, more than seven in ten felt that the EU ‘has not contributed in any way to addressing the crisis’ and nearly eight in ten resigned themselves to the view that the EU is unlikely to change

Other polls have recorded an increase in public support for leaving; today, more than one in three Italians say they would leave while less than half think this is a bad idea. Feeling abandoned, Italians have also become less trusting of the EU —with just one in four doing so — and more likely to say that their membership of the EU is a ‘disadvantage’, with 67% doing so.

All of this is raising big questions about the ability of the European Union to revive public enthusiasm in the broader project. As even the New York Times noted this week: the question to ask is not whether the EU will survive — because it will — but rather what is the point of any union if it cannot find unity when unity is needed most.

Passionate pro-Europeans routinely begin their columns and tweets with the famous quote by Jean Monnet: ‘Europe will be forged in crises and will be the sum of the solutions adopted for those crises’.  But many other things can be forged in crises — including Euroscepticism and a belief that, when it comes to the crunch, you really can only rely on your nation.

We tend to forget this now, but it was the EU’s fumbled response to two earlier crises — the Great Recession and refugee crisis — that convinced Britain’s Leave voters that being in this organisation was not in their longer-term economic interests.

Most Italians have not yet reached the same conclusion. But if you put Europe’s bungled response to Covid alongside Italy’s worsening economic picture then it is not hard to see how the different impact of the current crisis and the recovery to come might push them further in this direction.

When Italy eventually emerges from this crisis it will not only be a poorer country but will also be a more Eurosceptic one, too. And who knows where that will lead.


Matthew Goodwin is Professor of Politics at the University of Kent. His new book, Values, Voice and Virtue: The New British Politics, is out on March 30.

GoodwinMJ

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andy thompson
andy thompson
4 years ago

Good riddance to the EU and good luck to the individual countries that have suffered the most because of it. Come on Italy you are made of strong enough stuff to be able to survive and prosper after this terrible mess, you show the pompous, greedy idiots in Brussels! To Hell in a handcart with all of them.

Michael Dawson
MD
Michael Dawson
4 years ago

I’m not keen on posters who use the current crisis as evidence to support their pre-existing views/prejudices. But I have to make a personal exception in this case – sorry. It is very obvious that the focus of identity in this crisis is the nation state, not the EU, the region, local authority or whatever. The lockdowns are national, the leaders we look to are national. The solution will be international, but not because of the EU, UN or WHO – because there are scientists working all over the world to analyse the spread of the virus, come up with tests and treatments and, we hope, ultimately develop a vaccine. It’s hardly a surprise that the EU looks to be coming out of the crisis badly, given that the severity of the disease across Europe is as about as uniform as the economies of Europe – in other words, not very uniform at all. It was pretty obvious in 2009/10 that the euro was a badly conceived project and if the coronavirus leads to a serious reappraisal and an orderly break up of the eurozone – if that is possible when the current crisis is over – then maybe some good will have come out of our current travails.

Fraser Bailey
Fraser Bailey
4 years ago
Reply to  Michael Dawson

If you read the Ashoka Mody book I reference below, you will learn that it was obvious to economists as early as 1970 that the euro was a badly conceived project. In a rare example of economists getting something right, they predicted all that has come to pass from the moment the euro was first mooted in December 1969.

Michael Dawson
Michael Dawson
4 years ago
Reply to  Fraser Bailey

Thanks, I’ll look out for the book. I should maybe have added something like ‘pretty obvious except to the wilfully blind by 2009/10 that the euro was a badly conceived project”. I remember when I was at university c 1990 and the debate over Britain and the ERM. My former tutor was very keen for the UK to join, I was against, mainly because of the major differences between the UK economy and Germany (and the other EU members). Sadly, the euro project glossed these differences over in a very dishonest and short-sighted way, with consequences that many southern Europeans are still living with. Meanwhile Germany gets the benefit of an under-valued currency and continues to run destabilisingly large trade surpluses.

M Blanc
M Blanc
4 years ago

It’s ironic that the Left used to raise their fists and shout, “Power to the people!”, but when populism arrives, or even threatens to arrive, they’re terrified.

plynamno1
PL
plynamno1
4 years ago
Reply to  M Blanc

What’s ironic is ascribing that kind of power to a fifty year old John Lennon song and James Brown lyric. Its anthemic slogan-title did appear at some Black Panthers rallies, but down the decades has featured in more crowd scene-placards in Hollywood films than it ever moved real people in a place like the UK. In the US context back then, it was a slogan that arose from ever-increasing public anger at politicians who insisted on ignoring the mass desire for Peace as the US-led war on Vietnam killed and destroyed and as the US headed for defeat. The US Left back then and European liberals nowadays, are very different animals. As you ought to well know, many leftwing people in working class organisations never refer to what they do as ‘populism’, though their scepticism of various institutions in our lives is part of that wider mass inclination towards populist-style criticism that has been a feature of the past decade and more.

timothy.j.clarke01
timothy.j.clarke01
4 years ago

What has not been discussed is the depth of the ill feeling and who this will play out in the Italian context.

In the UK, the feeling was one of ‘euro scepticism’. Things became very binary after the referendum but before it, before the division of the British into ‘Remainers’ and ‘Brexiteers’, most people were ‘euro sceptic’, but there was no violence, little violent feeling and by and large the final result is accepted.

What is emerging in Italy is a visceral hatred of the EU among a fairly large sector of the population even though the majority will not consider leaving. Italian politics can turn violent. Terrorism, rebellion and regional fracturing are always there, potentially and if stirred break out above the surface.

andrea bertolini
andrea bertolini
4 years ago

It is more likely that the EU will tear Italy apart than the opposite. Italy did very well for itself until the 1990s, so much so that it was at some point the 5th economic power in the world. One of the methods used to good purpose in the first four decades after the war was the devaluation of the Lira; debt was very manageable (between 40 and 60%, if I remember correctly), personal saving were huge compared to most other countries, etc. With the euro (accessed at a suicidal exchange rate) the whole system collapsed, since devaluation was no longer possible and the cost of living increased tremendously. There are plenty of studies that show that countries like Germany and Holland benefited the most from the euro–which also means that Italy helped finance precisely those countries, while impoverishing itself. A banker told me some months back that “in the past 20 years we have been living on the savings of the older generations; when those are exhausted, we’re financially dead.”

M Blanc
MB
M Blanc
4 years ago

I visited Italy in the 1970s. It was wonderful, of course, and affordable for a young working-class American such as myself. I wasn’t able to return, with Mme B, until 2013. It was still wonderful, although now you had to book a timed ticket to the Uffizi instead of just showing up and entering, if the employees weren’t on strike. The increase in prices was astounding. Fortunately, I was much more prosperous 36 year later, so it was just another fairly expensive vacation. But I wondered how working-class Italians could afford to live there.

Mike Hall
Mike Hall
4 years ago

Unlike the UK, for Italy to leave the EU would require a wrenching of their soul from the EU and a totally new understanding of its national existence. I don’t see any sign of that. No one is projecting a positive-pop image of a bright, sprightly Italy that holds. (Though, one thing we’ve learnt of late is that things can move fast when they start moving.)

Fraser Bailey
Fraser Bailey
4 years ago

Matthew refers to Ashoka Mody, whose recent book ‘Eurotragedy. A Drama In Nine Acts’ is essential reading. Fortunately I picked it up the day before the bookshops closed. It has recently been republished.

Douglas McCallum
Douglas McCallum
4 years ago

Under its recent political leadership Italy has wholeheartedly embraced the populist philosophy of “victimhood”: whatever is wrong, it’s someone else’s fault. So in the debate over mutualising debt, Italy is the cheerleader; Spain has been hit much harder by the coronavirus and it also calls for corona bonds, but it does not reject other forms of aid nor does it scream out as a victim, seeking instead to come across as hard-pressed but responsible. It is clear that Italy is cynically trying to use the coronavirus disaster to force the EU to establish mutualisation of debt, as it has so long wanted. If Italy’s concern were really to get help for reconstruction, it would not reject the use of the ESM or any other mechanism to help out. The author of the article is quite wrong on this point: the EU has not “abandoned” Italy but it does rightly insist on aid which will have the support of the whole EU, which will be sustainable, and which will provide a variety of assistance mechanisms suitable for the many countries (including but certainly not limited to Italy) which will need it.

Lee Johnson
Lee Johnson
4 years ago

The EU will dwindle and not die.
What does this mean ?
It means that new opportunities should take hold.
What are they ?
The Anglosphere – Russia – China…..
Will Europe stay in one piece ? Not very likely is it ?

perrywidhalm
perrywidhalm
4 years ago
Reply to  Lee Johnson

You seen to be having a conversation with yourself.

Lee Johnson
Lee Johnson
4 years ago
Reply to  perrywidhalm

Aren’t we all

Mike Hall
Mike Hall
4 years ago
Reply to  Lee Johnson

I’d love to know what evidence you have of the “Anglosphere. Its just a loose chuck-around media phrase with little definition, e.g. based on economic models, behaviour, democratic-legal institutions most of Scandinavia could be called “‘Anglospheric”.

Lee Johnson
Lee Johnson
4 years ago
Reply to  Mike Hall

How about: Common law + shared culture and language + humour

perrywidhalm
perrywidhalm
4 years ago

Europe was never united and never will be. The EU was a temporary blip in the long history of European warring States.