For decades, the rest of the world could largely ignore the contact sport known as Italian politics. Not this week, when global financial markets took a giant dip out of fear that a postelection crisis in Rome might force a default on Italy’s outsize debt or lead it to withdraw from Europe’s shared currency.
Italy, warned Ignazio Visco, governor of the country’s central bank, is “a few short steps away” from losing the “asset of trust.”
Qualities such as trust, fiscal prudence, and rule of law are indeed the unseen assets of an economy, especially in one that is the fourth largest in the European Union. Italians went to polls three months ago to choose new leaders, yet they still do not have new government. The key dispute is whether Italy should ignore EU rules on debt levels – and even possibly leave the EU.
The top vote-getters in the March election, the populist Five Star Movement and the right-wing League, are euroskeptics. The League claims EU rules are “enslaving” Italians, barring them from borrowing more to spend more. But President Sergio Mattarella, who must bless any coalition government, is in favor of Italy living by EU standards of governance. The standoff could lead to a compromise or a new election as soon as July 29.
Elections do more than set a new direction for a country. They also serve as a test of voter understanding about the values that drive innovation, stability, and prosperity. A consistent majority of Italians still support the euro, or the common currency, which is a solid benefit of 75 years of efforts to unify postwar Europe. But they also see little urgency in dealing with the third-highest public debt in the world and the eurozone’s largest in absolute terms.
Private investors fled Italy’s financial markets this week because the country seemed not to understand that economic growth relies on the spending restraint and similar promises that Italy, a founder of the EU and the euro, made to its partners. Markets now seek consistency and certainty in Italian policies, but most of all, cooperation on the values that have turned the EU into the world’s second largest economic region.
In his last book, “Factfulness,” the late Swedish statistician Hans Rosling pleaded for more nations to unify around a common search for truth. “In order for this planet to have financial stability, peace, and protected natural resources, there’s one thing we can’t do without, and that’s international collaboration, based on shared and fact-based understanding of the world. The current lack of knowledge about the world is therefore the most concerning problem of all.”
Together, the EU nations, as an intentional community, will eventually make better choices on essential values than if each country splits off on its own. Greece made a choice to stay in the EU after its 2011-12 financial crisis. Now it is Italy’s turn.