The uncertain position of the new government in relation to the European policy.
A centre-right government is at the direction of Italy after a decade dominated by the centre-left parties. It is not only an ordinary passage, as it the case in a democratic regime. Giorgia Meloni the head of the new government is the leader of a party that has not been at the head of the Italian government after the end of fascism. It is a big novelty for Italy and for Europe.
1. Europe is caracterized by inflation and lack of growth. The goal of containing inflation within the 2 percent limit became a chimera, At the end of October, Inflation fluctuated in Germany and Italy raround 12 per cent, a figure six times higher than the eurozone rule of 2 per cent. With householders who have seen the collapse of their purchasing power the poverty has increased.
According to polls by Caritas, the Catholic organization that fights poverty, the number of families in absolute poverty has reached unprecedented levels, touching about six million people deprived also of essential nutrition. In summary, the unprecedented rise in inflation is associated with the rise in absolute and relative poverty.
This is the picture facing the new center-right government, headed by Brothers of Italy, the party led by Giorgia Meloni which has achieved significant success, going from less than 5 percent obtained in the past national elections to 26 percent of the vote.
Is this a stable success?
It has to be remembered that in the past five years other opposition party have obtained even more relevant results. Five Stars Movement, as the main opposition party, collected 32 percent of the vote in 2017; and the League, a right party, obtained about 34 percent of the vote at the following European election in 2019. A demonstration of the mobility of the vote in a country signed by great economic and social difficulties.
Will the new right-wing government realize a substantial change of the disastrous current condition?
2. Generally, a country involved in this framework is looking for a way out accepting the devaluation of the currency that favours the export of goods and services as mean to increment the domestic production along with employment. Japan took this course with a notable devaluation of the yen in relation to the major currencies of the developed world. But this solution is unworkable for the eurozone countries, being the single currency under the dominance of the European Central Bank.
It is a matter of fact that the increase in public spending is necessary to implement a new economic course. Public spending in terms of salaries of public employees, that have seen a collapse of their purchase power, along with public investments are necessary components of a new growth outlook.
There are significative examples going in this direction in Europe and outside.
At the end of October, Germany, without consulting the European Commission, decided on a public investment of 200 billion euros to support families and businesses. In the following days, Japan decided, in turn, an increase in public spending by the same amount, equivalent to two hundred billion euros, aiming to revive the economy, favouring consumption and investment.
It is worth remembering that Japan has a public debt equal to 266 per cent of national income - about 120 per cent more than the Itaian. The Italian public debt is the highest of the major Eurozone countries, but this does not change the terms of the problem. The only way to reduce it as a percentage of national income is to gradually increase the latter.
In proportion in Italy an additional public expenditure of about 100 billion euros would be required. But the European Commission, as the guardian of European financial policy, is against the German choice (as well as a similar choice in the Netherlands and Austria). The Commission opposition is based on an abstract reason of principle, given that Germany has one of the lowest public debts, as a percentage of national income, in the EU.
3. The European Commission and the ECB are moving in the opposite direction: they are proposing a debt reduction independent of the current deflationary trend. A position that pushes a speculative effect on the euro countries constrained to increase the national debt to front the family and public expediture crisis.
Summing up, the increase in public spending in a Eurozone country to assist households and to increase public investment involves a speculative attack from the financial markets unless the increase in spending is supported by a monetary policy financed by the Central Bank-- a measure that reduces the need for the state to resort to financial markets.
If the new right-wing government adapts to the policies imposed by the European commission, it will repeat the policy of past center-left governments which led to negative GDP growth, reduction in the purchasing power of the middle classes, and an increase in absolute poverty.
The alternative is clear and radical at the same time.
On the one hand there is the reasonable and, in many ways, obvious German or Japanese solution, to refer to two great countries; on the other. the European line supported by the Commission and the Central Bank. A line with no outlet, if not the worsening of an unsustainable situation that affects many European countries as well as Italy.
The question is whether the Italian government will abide by European rules that are abstractly indifferent to the economic reality of each country or whether a policy appropriate to the country's circumstances will be adopted
For now, the new center-right Italian government shows no determination in the direction of the actual change that would be needed.
The alternative is between a radical change in economic policy and the continuation of the policy that has brought Italy back to its current state, not without the responsibility of successive governments over the last decade.
The future remains uncertain. The only thing we can be sure of is that without a radical change in past policy, the country's economic and social conditions will worsen. If the change of government does not mean an effective change towards the current European politics, we will find ourselves in the condition that was at the center of the famous novel by Tomasi di Lampedusa, , The Leopard: “If we want things to stay as they are, things have to change”. In our case, just the government color change.