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Pesky voters ignore markets, vote against austerity

When an anti-austerity, anti-establishment internet-based political movement with few policies and led by a comedian, gets 25% of the vote in a general election, you know for sure that the political system is travelling on a one-way ticket to disintegration.

Beppe Grillo's Five Star Movement (M5S) won 54 seats and cashed in on Italians’ hatred for a corrupt, incompetent state that has cut their pensions, living standards and left record numbers of young people out of work.

Beppe Grillo
Beppe Grillo

Deadlock is what the markets didn’t want. That’s why Mario Monti was appointed by the European Central Bank to head a caretaker government 15 months ago as Italy’s debt mountain threatened to overwhelm the euro. But given half a chance, the electorate rejected his policies.

The ex-Goldman Sachs banker only got 10% of the vote when he put his austerity programme to the electorate. And with Silvio Berlusconi also raging against Brussels and promising everyone a tax cut, many voters backed a man who has somehow evaded prison.

As a result there is no immediate prospect of a stable government to manage Europe’s third largest economy. And the markets don’t like the stalemate at all. After initial polls showed the centre-left alliance winning, the markets rallied.

Then when the electoral deadlock was confirmed, black turned to red on trading screens around the world. Italian bonds were sold off, trading in the major banks was suspended, the stock markets plunged and the euro crisis returned with a vengeance.

“This looks like a recipe for total gridlock,” commented Nicholas Spiro, a sovereign debt analyst. “On current projections, financial markets are facing the worst of both worlds in Italy: a full-blown political crisis in the eurozone’s third largest economy and a severe setback for the liberal economic agenda championed by Mr Monti.”

Pesky voters!

Enrico Letta, deputy leader of the Democrat party, concluded that the “absolute majority of Italians have voted against austerity measures, the euro and Europe,”.  This, he claimed, sent a “a very clear signal to Brussels and Frankfurt”.

But is anyone listening at the headquarters respectively of the European Union and the European Central Bank? No they’re not. The EU and the ECB is desperate to prop up a weak currency and austerity, austerity and yet more austerity is the mantra. No matter that it doesn’t work. They have no alternative.

Spending your way out of the crisis is no good because it’s a global economic recession that is already dependent on large-scale printing of money to prevent a full-blown depression. It’s not just the political system that’s broken.

Grillo’s Five Star Movement is hostile to Brussels and the indecently corrupt Italian establishment. It wants to reform parliament by halving its size and a new electoral law based on proportional representation. Other than that, it has little to say.
Grillo – called everything from “sans-culotte satirist” to “populist, extremist and very dangerous” –  hands it back with interest. His nickname for Berlusconi is “the psycho-dwarf”, while he refers to the technocrat Monti as “rigor Montis”.
Grillo told the Financial Times last year: “We are occupying a void, which in other places like Greece has been filled by Nazis and extremists. We are a response to government ‘parasitism’, corruption, a system of political diarrhoea.” Recent scandals include arrests at the top of state-controlled Finmeccanica to corruption probes into the Eni and Italy’s third-largest bank.

Grillo does not appear on television or take part in debates. His movement – it’s definitely not a party – is driven by the use of social media. He runs Italy’s most-read blog and the M5S organises on two levels – internet and local grassroots.

He used the social network “meetup”, which was already active in Italy, to set up local support groups across the country. There are now more than 700 such meetup groups, with more than 100,000 members.
In Britain too, the establishment and the state is also mired in a variety of scandals. The old politics is dying right across Europe and further afield as the recession coincides with a crisis at the top.

A new politics, a democratic transformation of political systems, is not only possible – it’s absolutely necessary.

Paul Feldman
Communications Editor
26 February 2013

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