Italian media report all sides of Italy’s political spectrum are calling for early elections. Unfortunately, that means a return of the unreformed Italian political class to government sooner than expected. Politicians are not so fond of technocrat Prime Minister Mario Monti, who has followed a path that resembles austerity and reform.
Depending on where politicians stand politically, they want to tax and spend more, cajole the European Central Bank into inflating away Italy’s debt, or abandon the euro altogether to regain the ability to print Italian lire until Kingdom Come. None of these options address Italy’s real problem, which is a desperate need for economic liberalizations.
Regional elections will take place in February 2013. Politicians now want the general election, scheduled for April, to coincide with regional elections. Although two months may not make much of a difference in the long run, the attitude of Italian politicians toward Monti’s mission of reform is indicative of the larger problem of status quo-ism in Italian politics.
As I explained earlier this week here on OpenMarket, Italian politicians returning to government moves Italy further away from the path of reform and prosperity.
The Italian political class—which relies on buying votes through corrupt public contracts, state employment, and regulation catered to special interests—is beholden to the unsustainable status quo.
… rejection of austerity is a broader rejection of change. In ousting him [Italian ex-Prime Minister Silvio Berlusconi] from government last November, markets proved how seriously they take reform as a condition for financing Italy’s sky-high debt pile.
Italy needs rapid and significant market-oriented changes, not more spending to prop up an impossible economic structure. The return of Italian politicians to Italian government is a proposition that Italy simply can’t afford.