1.    Fifteen years ago, the euro was born under propitious auspices. The European Union had gone through a phase of high growth . The growth of employment had exceeded even the United States of the New Economy. After  the EU’s Lisbon conference at the start of 2000, dedicated to the employment, the European Commission estimated that at the end of the decade, the EU countries would have  reached full employment. Under these favorable auspices began the euro’s  new century.

We know that the years that followed were not up to the forecasts. The critical phase of the European economy began with the 2008 crisis symbolized by the collapse of Lehman Brothers. The European Union and, in particular, the eurozone, tried to  answer to the crisis with a policy of  tough  austerity. A mistaken and deflationary policy, the unfortunate results of which are quite evident.

The comparison with the U.S., where the crisis  started, is instructive and unforgiving. After the Great Recession, in 2010, the United States has taken a path of growth, although slow and discontinuous: The national income has returned to pre-crisis levels and the unemployment, that  had reached 10 percent, fell to 6.3 per cent. In contrast, the eurozone’s economy, subject to the harsh austerity policy, lingered between recession and stagnation;  unemployment rose to almost 12 percent, with catastrophic peaks higher than 25 per cent in Greece and Spain. The European obsessive austerity could not provide a worst proof.

2.    It is interesting to read in this contest the results of the recent elections for the European Parliament. In the past thirty-five years this election had a more ritual than substantive meaning.  Not so this time. The European Parliament was so far characterized, with minor exceptions, by a sort of Parti unique, made up of pro-European conservatives and socialists. Now, about 30 percent of the newly elected members belong to the area of the euroskeptics, when not explicitly, in favor of an exit from the EU.

If the election had been  held for only 27 countries instead of  28 that make up the Union, the two historic parties, Socialists and Conservatives, forming the majority of the European Parliament,  would be for the first time a minority. Only with the addition of  the votes for the two parties that form the basis of the German Grand Coalition - CDU-CSU and the Social Democrats - conservatives and socialists retrieve a thin majority.

However, the very novelty is in the defeat suffered by those governments that  historically have been at the basis of the E.U. and of the eurozone.

For the first time in centuries old history of British democracy the two ruling parties - Conservative and Labour – were beaten  by a third party, UKIP, the Independence Party, which leaves behind  Labour  and relegated to third place the Conservative Party of David Cameron, which leads the government. According to the polls, UKIP could  still be the largest party in the general elections of 2015, promoting the exit  of England from the European Union.

In any case, Cameron,  attempting  to recover the  lost vote, will focus on his commitment for  "in or out" referendum. And it is a matter of fact that, in addition to the separatist  position of UKIP, a relevant  part  of his  conservative  party  is in a eurosceptic position, and the  Labour Party is  divided. The EU without Britain would mark a historic change of the European prospect.

The outcome of the election in France was, from the point of view of the eurozone, even more upsetting. The National Front of Marine Le Pen has overtaken both the Socialist Party of President Hollande, who leads the government, and the UMP’s opposition. The homeland of the founding fathers of the Union, and  the architects of the euro, from  Monnet and Schuman to Mitterand and Delors, now sees its main  pro-European parties reduced to elect, together, only a third of the French MEPs. And, the Socialist Party, two years after the take-over of the majority and the presidency, is  reduced to a meager 14 percent of the vote.

According to current polls, Marine Le Pen, after winning  the local and European elections, can realistically aim, with her anti-EU platform,  to the Elysée. In any case, the Franco-German partnership, which has been for over half a century the axis of European integration,  may lose its meaning after the collapse of the two main pro-European French parties.
 

3.     The surprising results of British and French elections are not isolated. In Spain, the Popular Party of Mariano Rajoy, who won the previous national elections with a large majority of 45per cent, has lost in May nearly twenty points. In Greece, New Democracy, the party of  Antonis Samaras, the head of the government, was beaten  by Syriza, led by Alexis Tsipras, which calls for the overthrow of the troika’s awful policies. While Pasok, who  triumphed with George Papandreou in the 2009 elections with 44 percent of the vote, almost disappeared, reduced to a humiliating 8 percent.

By large,  many  of the  ruling governments have paid the price of the complicity of national elites with the European austerity policy. In fact, the only historical parties that come out successful in these  European elections, gaining two-thirds of the available seats, were  the  parties that make up the German  Grand Coalition.  An outstanding mark of the hegemony exercised by Germany over  the Union and, particularly, on the eurozone.

4.    Startingly different, it was the outcome of the European election in Italy. Matteo Renzi, the new leader of Democratic Party and the head of government for less than three months, has brilliantly stood the test surpassing the magical threshold of 40 percent of the vote, never previously reached by the Democratic Party.

An unexpected and intriguing success. Though, not inexplicable in the scenario of the massacre of a large number of incumbent governments. In less than thirty months three Italian governments – respectively, led by Berlusconi, Monti and Letta - had been swept away by the winds of crisis. So, the Renzi’s, born less than three months, was a new government that voters could only judge on the basis of its outstanding promises . More important, Renzi, young mayor of Florence, was able to present himself like a leader, who ruthlessly repudiated the politics of past governments and parties, including his own, just conquered, Democratic party. In few words, he acted as a head of a new opposition.

Breaking down the traditional boundaries between left and right -  and attacking   the trade-unions and, in particular, the CGIL - Renzi has basically dissolved the ephemeral centrist party invented by Mario Monti; retrieved  a portion of votes from  the "Five Stars", which Grillo had obtusely isolated in a pure protest stance; gained a number of votes from the Berlusconi’s center-right old coalition.

So, the Italian exception was not a victory of an incumbent government, but rather a vote of confidence to a promise of change in respect to the policy of the past governments. The question is: how will Renzi use this exception in the gloomy map of the European election? The answer will essentially depend on the change that he will be able to promote at the European level. Obviously, it’s a hard job. But the outcome of the election has opened or, perhaps, made mandatory the search for an alternative to the harmful eurozone’s policy.

However, it is difficult to imagine a turning point  in  Europe without any alliance; or , by contrast, refusing  to court  Angela Merkel:  An experience made by other governments, of different colors, without any appreciable result.
What is certain is that it is difficult to give a significant turning point to the European policy without any alliance. It deserves a particular attention from this point of view,The new French political framework.

5.   In  France, as we have seen, the outcome of the election was opposite to the Italian one. François Hollande led the Socialist Party to the worst electoral defeat in the history of the Fifth Republic. If, Renzi needs to mark a turning point in European policy to make sense of his victory, Hollande needs a  similar turning point in the relationship with the eurozone to avoid repeating the sad story of Papandreou’s and Zapatero’s socialist parties in Greece and in Spain.

In  Italy , six years after the outbreak of the crisis, the economic and social situation is the worst in decades. The national income is about 10% lower ; the public debt  that was by 2008  at 106 percent of GDP has reached 135 percent; the unemployment has more than doubled, rising from just over 6 percent to more than 13 percent.Only Greece is worse than .

The so-called structural reforms  in the government's program, which should serve as a bargaining chip with Berlin and Brussels, are or socially harmful, like the labor reforms, either institutionally dangerous, as it shows the planned electoral reform, which aims to concentrate all powers in an artificial parliamentary majority, devoid of the check and balances, which distinguish a democracy from an authoritarian regime. In other cases, reforms are desirable, from justice to the taxation. In any case, the ones as well the others cannot change the  macroeconomic framework in which growth remains a mirage, and the only certainty is the rise of mass unemployment and the families’ growing impoverishment.

6.    Let’s  consider  the Italian economic prospects outlined  for 2014-15 by the European Commission. The real GDP growth would be 0.6 per cent in 2014 and 1.2 in 2015; calculating a level of inflation respectively, of 0,7 and 1, 2, the total nominal GDP growth would reach 3.7 percent. Assuming that the forecast will be fully realized - but the ECB indicates a lower value of inflation - the increase in nominal GDP in the two years amounts to roughly 60 billion euro, and tax revenue to roughly the half.

In the same two-year period Italy will have to disburse about 170 billion euro for the payment of interest. Drawing it on what resources? In the past, Italy has coped with interest expenditure, using a high primary surplus - the budget surplus before interest payments - in addition to more taxes and cuts of the social spending. But the dimension of the surplus depends on the GDP increase. On the basis of the expected growth, the primary surplus, which was in 2013 at 2.2 per cent of GDP, amounting to about 36 billion euro, should reach, according to the current government’s forecasts, an yearly average of 3 per cent of GDP in the next two years, totaling roughly 90 billion euro, to be used in order to comply with the European scheme, functional to the accelerated reducing of the deficit toward the structural budget balance.

The commitment to such a large primary surplus constitutes a waiver of a significant amount of resources that  otherwise could be aimed at the recovery of public investment, badly needed to boost the anemic economic growth. Consider as an alternative, the reduction to half of the planned primary surplus, prolonging the period forecast for the budget balancing, and using the freed resources, worth about  50 billion euro, to boost public investment and growth. This line should be adopted until when the GDP growth, pushed ahead also by the multiplier of public investment , will have reached a growth rate of GDP of at least five percent.

Moreever,  the government should add to the computation of public debt the arrears unpaid by the Public Administration, at the same time excluding the liquidation of those arrears from the calculation of the public deficit.  This would be good accounting, not a cosmetic manipulation (See: Mario Nutir. Arrears, http://dmarionuti.blogspot.it/2014/03/arrears.html.) And it would enable the Renzi government to keep its promises  (to liquidate arrears by June, then July 2014, then only next year) and boost the economy without breaking the spirit of Brussels rules.
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In any case, it is worth to underline that the current balance deficit of Italy, at 3 per cent of GDP, is the lower among the bigger EU member states, except Germany. It is not a coincidence that Spain, indicated as a model of recovery by the European Commission, will still present in 2014 a forecast balance deficit of 5.8 per cent.

The result for Italy of an effective boost of public investments, particularly concentrated in maintenance works, that are the most efficient in accelerating growth and employment would be the reversal of the self-destructive trend of the continuous retrenchment of investment and growth, as it has already happened in recent years, resulting in the increase of  both  debt and unemployment, in a hellish  vicious circle .

Anyway, given that the "Recommendations" and the mandatory macroeconomic scheme of the European Commission  will come into force by the European Council of Ministers, what position  will the Italian Government take on?  Is Renzi going to comply with the Commission’s requirements? Perhaps  with a few marginal adjustments, in exchange for a set of increased structural reforms, that could not  modify the  overall grim economic picture? Or will be clear  the  need to build up an alternative to the ill-fated past austerity policies?

7.   The alternative is, first of all, in showing  that the emperor  has’n got any clothes. And if it is so in Italy, it will be seen in  France and in other countries. Not surprisingly, the European Commission has recommended  French government  to speed up the cut of the deficit- higher than the Italian – to increase the tax burden and  to speed up  the structural reforms, among which reducing   pensions and  the health care system – which, by the way, is considered for its efficiency and quality at the highest level of excellence in the world .
Is the French Government ready to follow passively this path, risking  the political suicide of the Socialist Party,  and opening the Elysee's  to Marine Le Pen?

Together, France and Italy (and certainly with the consent of some other countries in similar conditions, if not worse) could halt the spiral of the self-destructive eurozone’s austerity policy. They could; but, unfortunately, the first signs of the post-May elections do not go in this direction. The Italian government seems to be determined to achieve marginal flexibility of the European prescriptionson to  the budget. . And France is apparently moving in a similar direction pledging new public spending cuts along with a renewed set of structural reforms.

In other words, the need for a radical change of the austerity policy should be a common object  of the two largest  countries in the eurozone after Germany. Indeed, without establishing the conditions for a sustained and long-lasting recovery, it is useless to continue to pursue a balanced budget and debt reduction.

8.    Mario Draghi, President of the European Central Bank,  has announced new measures. Undoubtedly, the banks and financial markets will benefit  by the expansion of the liquidity, a further reduction in interest rates and the provision of a negative interest of 0.1 percent for the funds deposited with the Central Bank. That should  stimulate a greater supply of credit to businesses and households. The fact remains, however,  that the supply of liquidity cannot create  business investment  of the small and medium-sized enterprises, if the demand for their products is stagnating, if not declining. Draghi also said that more  unconventional measures may be adopted, as the deepening of deflation will require it. Once again, the care of the patient is referred back to the aggravation of the disease.

In any case, monetary policy can be a useful supplement, but it alone cannot cure the crisis and encourage businesses,  to invest  and increase production and employment in a deflationary environment. One doesn’t need to profess loyalty to Keynes to understand that the key is public investment. The current crisis was compared, at the start, to that of 1929, but  the experience has not ben considered. The New Deal was a combination of large public interventions and social reforms that have formed the economic and social environment of the Western democracies. Today everything seems to converge toward a kind of Anti-New Deal.

The May elections have shown a massive vote of dissent. Those results may be the last warning signal to the ruling elite of the three main Eureopean  countries after Germany. The reasons and the possibility for a radical change in the European policies are the only positive outcome of the European elections.  The alternative to change could possibly be a slow agony of the European integration, starting with the collapse of the eurozone, as we know it.
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P.S. At the Ypres Summit (June, 26-27) of the European heads of governments, Angela Merkel reiterated that compliance with the Stability Pact is the impassable red line, dismissing Hollande and Renzi illusion of an actual change of the austerity policy. Anyway, both prefer to tell that in exchange for structural reforms, there will be some flexibility in the application of the self-defeating policy and parameters that tighten the neck of Italy and France. A humiliating as fake satisfaction. In fact, whether it would still needed to be demonstrated, what we are witnessing is a genuine transfer of national sovereignty of the Eurozone member states not towards a dreamed supranational Union, but simply toward Germany, as the only hegemonic European power.