Eurozone economies seem to be bouncing back once again. The eurozone has started to grow again, inflation is well under control and stock markets are buoyant, even if unemployment stays stubbornly high. The British economy too is not doing too badly. House prices in Britain are creeping up to the extent that the Financial Times is asking whether Britain risks facing another property bubble. So is Europe leaving behind it the fit of blues that has made its citizens so grumpy for the past seven years?

I do not believe that Europe’s economic problems are over yet. My main worry today is the way that Italy – the sick lady of Europe – is being mismanaged. There is some good news coming from Italy: Inflation seems to be under control; the risk premium linked to 10-year Italian sovereign bonds is relatively low; and certain sectors of the Italian economy, like tourism, are bouncing back.

But other major economic sectors are in a long deep crisis. The Economist recently branded Italian manufacturing as “a washout”. Industrial production in Italy is 26 per cent below 2007’s peaks. Production of electronic goods has fallen by 35 per cent while car-making is down by 45 per cent.

Italian unemployment is forecast to reach 3.5 million by the end of this year. Were it not for the Cassa Integrazione – a government scheme in which workers can be laid off and the state pays them up to 80 per cent of their salary – unemployment would be even higher. Italian employers blame the high labour costs, bureaucracy and poor infrastructure for this depressing situation in Italian manufacturing. When one considers that Italy has the second largest manufacturing base in the eurozone, it is foolish to celebrate the end of the recession in Europe.

One of the major reasons behind Italy’s economic failures in the last decade is the country’s dysfunctional political system. Former Prime Minister Silvio Berlusconi still believes that the Italian Constitution’s clause that “the law is equal for everyone” does not apply to him as he has the support of about 30 per cent of the Italian electorate. Having been found guilty of tax fraud by the country’s highest court he still pretends that he can pull the strings that could well bring down the current weak government led by an uninspiring left wing prime minister.

The most recent Italian elections held earlier this year have left the government in an ungovernable state. A former comic, Beppe Grillo, mobilised the frustration of many Italians with the ineptitude of their political class. He won enough seats in Parliament to ensure that none of the other larger political grouping could rule. Thanks to the persistence of the octogenarian President Giorgio Napolitano a coalition of sorts was formed that includes parties from the left, the centre and the right.

I do not believe that Europe’s economic problems are over yet

As is to be expected in such situations, a weak government is presiding over a country that is plagued with serious competitiveness issues. And yet the current debate is whether the government will have to cave in to the centre-right Popolo della Libertà demand for the abolition of a property tax when the coffers of the state are practically bankrupt.

The centre-left Partito Demo­cratico is not much of a viable alternative to govern the country. The PD has lacked a charismatic leader for the last three decades. They spend most of their time in acrimonious infighting that has shorn off any credibility they may have had with the electorate. The old leaders still dominate the party and go out of their way to make themselves unelectable by persecuting the young sparks that could win them back the support of a politically weary electorate.

The PD’s best chance of getting elected with a workable majority depends to a large extent on whether they endorse Matteo Renzi, the inspirational young mayor of Florence, as their leader. Much will also depend on whether the current Parliament can come up with a decent electoral law that gives the majority grouping in an election control of both the lower and upper houses of Parliament.

If Dante were to come back from the grave to re-write his Divina Commedia in a modern context, he would be spoiled for choice as to whom to place in hell. My guess is that Berlusconi would be in one of the lowest circles of hell together with some of his diehard politicians.

Most of the Italian people would crowd the purgatory circle in a rewritten Dante masterpiece.

johncassarwhite@yahoo.com

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