The idea is making headway in Italy that the cause of all our ills is the European Union and that it is enough to leave it to return to a happy era of national sovereignty in which all problems disappear. In essence, it would be enough to free oneself from "European constraints" to reactivate the growth of the economy, consumption and investments, defeat unemployment, raise the competitiveness and productivity of our businesses. But in reality the European constraints are only the latest chapter in a decades-long history in which Italy fails to address the underlying causes of its economic and social weaknesses, resorting to currency devaluation and public finance deficits to pull live, plunges into a financial crisis, requests and obtains assistance from his allies by subjecting himself to an "external constraint", with the promise that "he will be good". But as soon as the situation improves, Italy tries to shake off the constraints and returns to the bad road of public spending distributed in rain, until the next crisis.
Italy has experienced this depressing sequence three times since the economic miracle of the 1974s and 1979s. The first time in the seventies, after the collapse of the stable exchange rate regime of Bretton Woods, the devaluation of the dollar and the oil crisis. The lira, left to market forces, depreciated widely and foreign exchange reserves dwindled as a result of persistent capital outflows. There was no alternative to recourse to the International Monetary Fund which granted no less than four loans to Italy between XNUMX and XNUMX in exchange for a series of economic policy conditions (the external constraint!) aimed at consolidating the public finances and reducing the balance of payments deficit.
The crisis was buffered, but the devaluations of the lira brought inflation to 22 percent at the end of the 15s: that's the beauty of monetary sovereignty, dear friends! With interest rates at 5 per cent, it was impossible to get a home loan, but on the other hand one could invest in BOTs and BTPs losing 6-XNUMX per cent in real terms (net of inflation). But no one noticed it anyway due to what economists call "monetary illusion".
In the 5s, Italy joined the European Monetary System (EMS) to bring runaway inflation under control. We accepted the commitment to implement a strict monetary policy and to limit the devaluations of the lira. Inflation gradually fell, but without managing to go below the "hard core" of 10 percent. This is because in those years the governments (especially those under the Craxi presidency) implemented a highly expansionary fiscal policy, with fiscal deficits of the order of 12-1981 per cent of gross domestic product (GDP) every year from 1993 to 59. As it should be obvious, today's deficit becomes tomorrow's debt, and the ratio of public debt to GDP doubled from 1981 percent in 118 to 1994 percent in 1992. This one-horse deficit-spending cure did not have the desired effects on growth and employment, nor did it serve to heal our structural weaknesses. On the other hand, the unsustainable burden of the debt was discharged on the exchange rate of the lira which had to leave the EMS in XNUMX.
A new season of exchange rate devaluations began, culminating in the maxi devaluation in the first quarter of 1995. But in the meantime the government had signed, and Parliament had ratified, the Maastricht Treaty on Economic and Monetary Union. Italy undertook to keep the fiscal deficit within 3 per cent of GDP and to bring the public debt back to 60 per cent of GDP; the government took steps to meet the Maastricht criteria and Italy was admitted to the Economic and Monetary Union on 1 January 1999. Our partners accepted that the conversion of the lira into the euro should take place at an exchange rate which incorporated most of the devaluations accumulated in previous years and trusted the commitment undertaken to restore public finances.
But things turned out differently. Initially, entry into the euro pushed down interest rates on Italian public debt, helping to reduce the fiscal deficit; furthermore, moderate income growth and inflation averaging above 2 per cent led to a gradual decline in the debt ratio to 100 per cent of GDP in 2007. But at that point the trend reversed and the debt ratio recovered to go up. It has been calculated that if Italy had maintained its public finance consolidation policies with the same intensity introduced in 1999, the weight of the debt as a percentage of GDP would have fallen to 2007 per cent in 70, which would have allowed us to better absorb and respond more effectively to the global financial crisis that erupted in 2007-09. Instead, the impact of the crisis on our public debt was devastating: the combination of falling income, deflation and overall accommodative fiscal policies caused the debt burden to rise again to 132,6 percent of GDP in 2016.
Blame the European constraints? The evidence does not confirm it: in reality, Italy is the only country in the Eurozone that is growing by less than 1 per cent, with the same constraints as the other countries adhering to the single currency. The discriminating factor therefore seems to be precisely the ballast of the public debt which absorbs resources that could be better used to correct the structural weaknesses of our economic system and to strengthen the growth potential. Without the constraints, what would we have done? More devaluations, more deficits, more public debt? All things already tested in abundance without success and which would have only postponed the showdown over time, in the meantime become increasingly salty.
Perhaps, if we had taken the constraints seriously, rather than always trying to circumvent them, we would have achieved the results that other countries have achieved, Belgium, Spain, Ireland, for example. As we have been repeatedly recommended by the European institutions, it was necessary to adopt an intense but short-term recovery strategy in order to limit sacrifices and austerity over time, and quickly obtain the expected benefits. Instead, it was preferred to dilute, attenuate, postpone, in the vain hope that over time everything will fix itself.
On the other hand, it was precisely the experience of the global crisis that demonstrated that it was wise for Italy to join the single currency. The euro protected us from financial turmoil that would have had disastrous effects on our public finances: instead, interest rates remained low and we benefited from the ECB's expansive monetary policy; the euro weakened marginally but enough to give a boost to our exports. In summary, we have given up an illusory monetary sovereignty at the national level in exchange for a much more effective sovereignty at the European level.
Accepting European constraints allowed Italy to have access to the large single European market with the Treaty of Rome in 1957, in the wake of a tradition that has seen since the Renaissance Italian merchants, bankers, architects and musicians operate profitably in the large European nations. And the idea of anchoring Italy to Europe is not the result of recent machinations of technocrats, but of statesmen of the caliber of Mazzini, Cavour, Einaudi, De Gasperi. Exiting the European enterprise which allowed Italy to transform itself in the post-war period from an agricultural and underdeveloped country into an advanced industrialized country, just to free itself from the constraints it entails, would be a self-defeating act of unheard-of gravity. We might as well, therefore, recognize once and for all that European ties are good for Italy because they curb the inclination of our political class, but also of civil society, to do things that do us no good. Devaluation of
money and public spending are like two drugs that give the addict a temporary feeling of well-being, but undermine the fiber and weaken the vital organs. The European rules were supposed, if we had taken them seriously, to detoxify and strengthen the country's health.
In reality, in the way we have managed them, they have only prolonged the withdrawal crisis, guiltily fueled by those who have sown continuous illusory hopes of renegotiating the exchange rate, of making fiscal rules more flexible, of leaving the euro. It is said that Giovanni Giolitti, head of the government of the "new Italy" between the end of the XNUMXth century and the beginning of the XNUMXth century, believed that Italy was a deformed country, with a hunchback, and that it could not wear a suit made for people with straight back. We had to make one on purpose. But post-war history has shown that Italy doesn't have a hump, it's just a little lazy and tends to postpone until tomorrow what it should do today, but that it has been able to react with strength and determination to the many challenges it has had to face . Of course, the economic and financial crisis triggered and propagated by globalization has been unprecedentedly harsh, but discarding the European dress that Italy has been able to wear on so many occasions with dignity and elegance will not help it get out of it.
