Tuesday, May 27, 2014

Italy Shows the Way

From Bruegel:
Second, in Europe Italy has clearly chosen a pro-European side. This should not be underestimated, as it was not at all obvious before the elections. The electoral campaign has been fought by many on an anti-EU basis and the risk of a Eurosceptic drift was in fact substantial, but it has not materialised. This may partly be due to the attitude that Italians traditionally have vis-à-vis Europe. As previous analysis has shown, in Italy, confidence in the European institutions has decreased over time but the positive confidence gap between European versus national institutions has remained the largest since the start of the sovereign crisis. Third, the contrast with neighbouring France, is striking. Two countries that are frequently compared in terms of economic indicators, France and Italy could hardly look more different in terms of preferences expressed vis-à-vis Europe. The victory of Marine Le Pen’s anti-EU Front National – which affirmed itself as the first party with an unforeseen 25% - is impressive, in a country that has been among the founding fathers of the European project. Coupled with Holland’s approval rating being in the doldrums, this electoral result could slow down the traditional Franco-German engine for European integration and prelude to a reassessment in the geography of alliances. In this process, Italy should play a role and put itself forward as a decided leader in the project of more European integration. 
By the way, I think the Italian result is much more significant than the narrow Syriza victory in Greece. Greece has been an outlier throughout the crisis: a very small economy with a very high sovereign debt, quite atypical of other "Club Med" countries (Spanish debt was private, not sovereign, before the crisis, and Italy's high sovereign debt was contracted in the pre-euro years, not as a result of the euro as in the Greek case). Those who think that Alexis Tsipras is going to lead Europe to a sustainable order are dreaming. Italy, on the other hand, is about to assume the rotating council presidency. To be sure, Italy is in great need of substantial structural reform and is hardly a model of government efficiency. But there are positive signs.

Out of Ammunition?

Françoise Fressoz, Le Monde's political correspondent, blogs that the president is "out of ammunition." Her comment follows Hollande's televised speech last night on the 8 PM news. I saw the speech. It wasn't just that he was out of ammunition--that is, had nothing concrete to propose to his anxious countrymen. It was that he seemed like an automaton, undoubtedly because he had been overcoached and had practiced too long in front of a mirror making gestures meant to be "forceful" but which in the event only emphasized his powerlessness. In the end, his message to the French was simply, "Je vous ai compris [slices the air aggressively with his left hand]... mais que voulez-vous que je fasse, on continue droit dans le mur [places both palms flat on the table in a gesture meant to convey well-meaning sincerity]."

Fressoz ends her blog with a typical piece of exaggerated French pessimism:
Deux ans après son élection, la France est devenue la grande malade de l’Europe. C'est pourquoi elle a divorcé d'avec ce président trop placide qui continue de lui promettre que «la réussite de tous» est au «bout du chemin »
No, France is not the sick man of Europe. Hungary is prey to neofascists and democracy is in danger there. Greece is far worse off economically. Unemployment is higher in Spain. But the French political class has not distinguished itself with imaginative responses to the crisis. The danger is compounded this morning by the apparent and astounding collapse of the UMP, the main opposition party, which has just ousted its leader Jean-François Copé after revelations of apparent campaign fraud on a massive scale. The scandal also threatens to engulf the former president and future UMP hope, Nicolas Sarkozy.

Hence there is a gaping void at the center of the political system. This void was the real reason for Sunday's vote: the French are gasping for air, not endorsing an exit from Europe or a veer to the far right. Sooner or later a political leader other than Marine Le Pen will recognize that fact and capitalize on it. I hope it's sooner.

In case you missed the (awful) speech: