Bersani vows to shake off shackles of rigid austerity
"We must leave the austerity cage," he told leaders of his Democrat Party, responding to Italy's electoral earthquake by tearing up his pre-election program.
"A change of course is absolutely necessary given that five years of austerity and attacks on workers have pushed up public debt levels across Europe.
"The vicious circle between belt-tightening and recession is putting representative government at risk and making it impossible to govern. The immediate emergency is the real economy and joblessness."
The pledge puts Mr Bersani on a collision course with the ECB, which is constrained from helping to shore up the Italian bond market unless Rome complies with Europe's austerity agenda.
"Italian voters may have effectively voted away the ECB safety net," Christian Schulz from Berenberg Bank said. The central bank cannot activate its bond purchase program unless Italy requests a rescue from the EMU bailout fund, and that in turn requires a vote in Germany's Bundestag.
"The ECB cannot - and will not want to - do anything to help Italy after the inconclusive election result, even if borrowing costs spiral out of control," Mr Schulz said.
Mr Bersani's Democrats and his allies control the lower house but failed to win the Senate. He is hoping for tacit support on a law-by-law basis from the Five Star Movement of comedian Beppe Grillo.
Mr Grillo has called Mr Bersani a relic from a defunct political order that must be swept away by civic revolution. Yet many of his 163 senators and deputies say the movement should seek common ground with the Democrats.
Mr Bersani said Italy should mobilise its voting weight in the European Union to push for an EU-wide change of course. He has natural allies in Paris.
French Finance Minister Pierre Moscovici warned colleagues in the European Monetary Union on Monday that present policies "risk a loss of social and political confidence across Europe. We must not pile austerity on top of recession."
Mr Moscovici said France would need an extra year to meet its deficit target of 3 per cent of gross domestic product and called for action to tackle the root of the crisis with an EMU-wide growth strategy.
French officials are deeply alarmed by the relentless upward rise in France's unemployment rate to 10.6 per cent, or 26.9 per cent for youth. President Francois Hollande's popularity ratings have crashed from 55 per cent to 30 per cent since his election in May, the fastest decline ever recorded for a French leader.
Italy, France and Spain toyed with a Latin alliance last year to confront Germany over EMU's contractionary policy mix but the initiative faded.
Mr Hollande pulled back from a showdown with Berlin and ultimately pushed through further fiscal cuts and reforms, while Italy's Mario Monti was never willing to jeopardise the European Project that he served for 10 years as a commissioner.
Critics say Mr Monti, whose Civic Choice list won just 10 per cent of the vote, went native in Brussels long ago and has been slow to understand the deeper political crisis unfolding in Italy.
The outgoing prime minister gave them fresh ammunition this week, saying it would be better to hold fresh elections than to see an anti-EU government take power.
It is unclear whether a second vote would achieve what he intends. The latest snap polls show Mr Grillo's support is still rising, jumping from 25 per cent to 28 per cent.
Ominously, nostalgia for Fascist leader Benito Mussolini has started to emerge as the postwar order crumbles. Two key figures have praised elements of Fascist rule over the past two days.
A leader of the Five Star Movement professed "fascination" with the Fascist sense of the Italian state and the family, while the deputy state secretary of the economy said Mussolini "governed well until 1935". The taboos are falling one by one.
Frequently Asked Questions about this Article…
Bersani, leader of the centre-left Democrats, pledged to abandon rigid austerity policies after years of belt‑tightening that he says pushed up public debt and unemployment. He argues the immediate priority should be the real economy and jobs rather than strict fiscal cuts.
The pledge risks a clash with Germany and the European Central Bank (ECB). The ECB is constrained from activating its bond‑purchase program for Italy unless Rome requests a rescue from the EMU bailout fund — a request that would require approval by Germany's Bundestag — so political moves away from austerity could raise uncertainty and borrowing costs.
According to analysts quoted in the article, the ECB cannot turn on its bond purchase program for Italy unless Italy formally requests an EMU bailout. That request would trigger a vote in Germany's Bundestag, so the ECB is limited in its ability to help following an inconclusive vote.
Bersani's Democrats and allies control the lower house but failed to win the Senate. He is hoping for tacit, law‑by‑law support from Beppe Grillo's Five‑Star Movement, but that movement is internally divided. The split control raises the prospect of fragile coalitions or fresh elections, increasing political uncertainty.
The Five‑Star Movement, led by comedian Beppe Grillo, campaigned as an anti‑establishment force and has grown in support (snap polls showed a rise from 25% to 28%). Its unpredictability and scepticism toward traditional parties could complicate policymaking and heighten market volatility, which investors should factor into risk assessments.
French officials, including Finance Minister Pierre Moscovici, warned that continued austerity risks social and political confidence across Europe. France signalled it might need extra time to meet deficit targets and pushed for an EMU‑wide growth strategy, highlighting divisions within the eurozone over fiscal policy.
Yes — Italy, France and Spain explored a "Latin alliance" last year to confront Germany over the eurozone's contractionary policy mix, but that initiative faded. Bersani says he would try to use Italy's EU voting weight to push for a change of course and has natural allies in Paris.
The article notes rising political fragmentation and even worrying signs like public praise for elements of Mussolini's rule by some figures, suggesting taboos are breaking down. Such political instability and erosion of the post‑war order can increase policy risk and market volatility across Europe.
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