Mario Monti dutifully imposed austerity on Italy and Italy's economy shrank as a result. Photo: Reuters
TWO months ago, when Mario Monti stepped down as Italy's prime minister, The Economist opined: ''The coming election campaign will be, above all, a test of the maturity and realism of Italian voters.'' The mature, realistic action, presumably, would have been to return Monti - who was essentially imposed on Italy by its creditors - to office, this time with an actual democratic mandate.
Well, it's not looking good. Monti's party looks like coming fourth; not only is he running well behind the essentially comical Silvio Berlusconi, he's running behind an actual comedian, Beppe Grillo, whose lack of a coherent platform hasn't stopped him from becoming a powerful political force.
It's an extraordinary prospect, and one that has sparked much commentary about Italian political culture. But without trying to defend the politics of bunga bunga, let me ask the obvious question. What good, exactly, has what currently passes for mature realism done in Italy? For Monti was, in effect, the proconsul installed by Germany to enforce fiscal austerity on an already ailing economy; willingness to pursue austerity without limit is what defines respectability in European policy circles. This would be fine if austerity policies actually worked - but they don't. And far from seeming either mature or realistic, the advocates of austerity are sounding increasingly petulant and delusional.
Consider how things were supposed to be working at this point. When Europe began its infatuation with austerity, top officials dismissed concerns that slashing spending and raising taxes in depressed economies might deepen their depressions. On the contrary, they insisted, such policies would actually boost economies by inspiring confidence.
But the confidence fairy was a no-show. Nations imposing harsh austerity suffered deep economic downturns; the harsher the austerity, the deeper the downturn. Indeed, this relationship has been so strong the International Monetary Fund, in a striking mea culpa, admitted it had underestimated the damage austerity would inflict.
Meanwhile, austerity hasn't even achieved the minimal goal of reducing debt burdens. On the contrary, countries pursuing harsh austerity have seen the ratio of debt to GDP rise because the shrinkage in their economies has outpaced any reduction in the rate of borrowing. And because austerity policies haven't been offset by expansionary policies elsewhere, the European economy as a whole - which never had much of a recovery from the slump of 2008-09 - is back in recession, with unemployment marching ever higher.
The one piece of good news is that bond markets have calmed down, largely thanks to the stated willingness of the European Central Bank to step in and buy government debt when necessary. As a result, a financial meltdown that could have destroyed the euro has been avoided. But that's cold comfort to the millions of Europeans who have lost their jobs and see little prospect of ever getting them back.
Given all this, one might have expected some reconsideration and soul-searching on the part of European officials, some hints of flexibility. Instead, top officials have become even more insistent that austerity is the one true path.
Thus in January 2011, Olli Rehn, a vice-president of the European Commission, praised the austerity programs of Greece, Spain, and Portugal and predicted that the Greek program in particular would yield ''lasting returns''. Since then unemployment has soared in all three countries. But sure enough, in December 2012 Rehn published an article with the title Europe must stay the austerity course.
Oh, and Rehn's response to studies showing that the adverse effects of austerity are much bigger than expected was to send a letter to finance ministers and the IMF saying such studies were harmful because they threatened to erode confidence.
Italy, for all its dysfunction, has dutifully imposed austerity - and its economy has shrunk as a result.
Outside observers are terrified about Italy's election, and rightly so: even if the nightmare of a Berlusconi return to power fails to materialise, a strong showing by Berlusconi or Grillo would destabilise Italy. And Italy isn't unique: disreputable politicians are on the rise across southern Europe because respectable Europeans won't admit that the policies they have imposed on debtors are a disastrous failure. If that doesn't change, the Italian election will be just a foretaste of the dangerous radicalisation to come.
NEW YORK TIMES