Will Italy plunge the EU into a crisis?
The unclear political situation in Italy is making the stock markets nervous. Shares plummeted on Tuesday while the euro exchange rate dropped considerably. Speculation is rife among the financial market experts of Europe's media about whether Italy will trigger a new financial crisis and whether former Italian PM Silvio Berlusconi can save the day.
Capital flight must be prevented
Italy's central bank chief Ignazio Visco has warned the Eurosceptical parties Lega Nord and the Five Star Movement not to turn the snap elections into a referendum on euro membership. This is a timely warning, writes financial expert Stefano Lepri in La Stampa:
“The fear that Italian government bonds could be converted into a new currency that would no doubt be devalued [against the euro] is prompting all the creditors to divest themselves of the bonds. ... A summer dominated by insecurity could cause irreparable damage even before new elections are held. When Greece was in a similar situation, money was withdrawn from bank accounts and hidden under mattresses. This must be prevented if we don't want the government that has yet to be formed to govern over nothing but ruins, the central bank chief warned.”
A worse scenario than Greece
The interest on Italian bonds rose above the three percent mark for the first time since 2014 on Tuesday. Die Presse is worried by the similarities between the current political situation in Italy and the one in Greece three years ago:
“As is the case today in Italy, rising interest rates (in plain language growing insecurity) were regarded as outrageous interference from abroad. In the end, however, the Greeks had to submit to the dictates of reality. Since the summer of 2015 Tsipras has been implementing the reforms demanded by the other EU members. And the situation is gradually improving; in 2017 the Greek economy registered substantial growth once more and unemployment is gradually decreasing. But before this improvement little Greece brought the Eurozone to the verge of collapse. In the case of the third-largest economy in the monetary union this trial of strength will be far more difficult for the other European nations.”
Can Italy remain in the Eurozone?
Not just Italy must reflect on whether it wants to remain part of the Eurozone, De Volkskrant predicts:
“Just as understandable as the frustration of many Italians with the state of their economy is the reluctance of voters in other countries to foot the bill for a fanciful Italian budget that flies in the face of all the agreements laid out in the EU treaties. After all, they were subjected to painful reforms and cutbacks by their governments for years on end. Yet just when France's Macron is pushing for a compromise between the north and the south on the euro, the crisis in Italian politics is forcing a different, far more fundamental debate: can a country like Italy which follows the principle 'spend and devalue' remain part of the budget-discipline-based Eurozone with its (too) strong currency?”
When only Berlusconi can save the day
After President Mattarella's veto and the resulting collapse of the Five Star Movement-Lega coalition, the Five Star Movement has called for Mattarella's resignation. In this chaotic situation even the controversial ex-prime minister Silvio Berlusconi would be an acceptable solution, Novi list concludes:
“Italy has traditionally served as a political laboratory for Europe, where new political solutions are tested. But in this laboratory things have now got to the stage where even the former prime minister Silvio Berlusconi, who was forced to resign at the height of the euro crisis, seems like stability and moderation personified. Berlusconi criticised the Five Star Movement and its motion for Mattarella's resignation as irresponsible. But who knows, perhaps it's Berlusconi who holds the key to the door leading out of the current chaos.”