Italy Is Europe's Next Big Problem

Emmanuel Macron looks on course to become France's new president, ending the threat of a euroskeptic at the Elysee. Even if Macron wins, though, it'll be too soon to celebrate a new phase of stability in the euro zone. According to Bloomberg's article Italy Is Europe's Next Big Problem, across the Alps, an economic and political storm is brewing -- and there's no sign anyone can stop it. Italy's economic problems are in many ways worse than France's. Public debt stands at nearly 133 percent of gross domestic product; in France, it's 96 percent. The last time Italy grew faster than France was in 1995. Both countries have struggled to stay competitive internationally -- but French productivity has risen by roughly 15 percent since 2001, whereas Italy's has stagnated.

Meanwhile Italian politics goes from bad to worse. The Five Star Movement, a populist force that wants to hold a referendum on Italy's membership of the euro system, is riding high in the polls and currently neck and neck with the center-left Democratic Party. The general election, scheduled for next spring, is unlikely to produce a clear winner -- and there's even a small chance it may result in a Eurosceptic government, if the Five Stars were to win enough votes and form an alliance with the fiercely anti-euro Northern League.

Europhiles in Italy are busily looking for an Italian Macron -- someone who could offer a liberal remedy for Italy's economic woes while fighting off the threat of "It-exit." Investors would like that. In the autumn, the European Central Bank looks set to slow its purchases of government debt. The prospect of political instability in Rome could spook investors, raising doubts over the sustainability of Italy's debt.

In many ways, Matteo Renzi, Italy's former prime minister, who resigned after a heavy defeat in December's constitutional referendum, would be the obvious choice. At 42, he is only three years older than Macron. He too has sought to modernize the left, even though he preferred to climb through the ranks of his party, rather than set up a new one as Macron did.

The trouble is that Renzi looks increasingly like a spent force. He has just obtained a fresh mandate as party leader, but many Italians doubt his promises because he reneged on a pledge to quit politics if he lost the referendum. His message has also become muddled. He claims to be pro-EU, but never misses a chance to bash Brussels -- for imposing fiscal austerity, especially. Why should voters opt for Renzi's half-hearted euroskepticism when they can have the real thing?

A year is a long time in politics. Italians could yet grow tired of the Five Star Movement and decide that Renzi offers a safer alternative -- but don't count on it. With luck, France is about to suggest that reason still prevails in European politics. Italy remains capable of proving otherwise.

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