Brancaccio and Fontana on the Financial Times

FINANCIAL TIMES – Letters and Comments

Italian memo to policy makers: time to change course?

Sir, The citizens of the eurozone’s third largest economy have delivered a chilling message to markets and policy makers around the world: there is neither a party nor a governing coalition that is strong enough to rule Italy for long, let alone able to manage a shrinking economy with rising unemployment. It is not difficult to speculate that the markets and policy makers, not only in Italy but also in Europe and the European Central Bank, will have to face once again the most disturbing question of all: “What is the future of the euro?”.Voters in Italy seem to have offered a rousing anti-austerity message. Is this lack of maturity and realism on the part of Italian voters, or a democratic way to tell policy makers to change course?

A few months ago, the International Monetary Fund admitted that it had underestimated the severe damage that austerity measures have inflicted on the world economy and especially on European countries. More recent economic analysis shows that countries that have imposed harsh austerity measures have suffered deep economic recessions: the harsher the measures, the deeper the downturn. What is even more interesting is that countries that have pursued harsh austerity measures have seen the ratio of debt to gross domestic product rise, not diminish. Are the results of the Italian elections a democratic way to tell policy makers in Italy but also in the eurozone and the UK that it is time to change course? The future of the euro, and with it that of the world economy, is at stake.

Emiliano Brancaccio (University of Sannio, Italy) and Giuseppe Fontana (University of Leeds, UK and University of Sannio, Italy)


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