Why We're Ungovernable, Part 7: Italy Does Chaos With Style
As an Italian-American I'm allowed to say it: Italians are an amusing mess. They go on about "la dolce vita," the sweet life of long lunches and short work days and pretty girls on little scooters - without acknowledging or apparently even realizing that the whole show is based on other people's money.
Take away the credit card and they, addicts forced to go cold turkey, descend into existential confusion. Which brings us to today's national election. Held as the euro crisis seemed to be abating - thanks to trillions of new euros from the European Central Bank - the contestants were: the technocrat ex-premier who was recently forced to resign for undisclosed reasons, the media mogul and former premier whose creepy/criminal lifestyle nearly landed him in jail last time around, a stand-up comic known for raunchy humor who can't hold office due to a manslaughter conviction, and an ex-communist who represents the workers and students most likely to stage the next general strike.
A bad bunch, sure, but at the end of the day one of them will have the power to at least try to address the country's problems, right? Nope, that's not how bankrupt countries work, at least on the way down. (At the bottom they'll give absolute power to a "strong leader" who promises to restore order, but for now Italian voters, like their American counterparts, still cling to the illusion that normal life can be restored with a few tweaks of the tax code or short-term interest rates.)
Instead, my ancestral homeland got a hung jury:
ROME (AP) -- The prospect of political paralysis hung over Italy on Monday as partial official results in crucial elections showed an upstart protest campaign led by a comedian making stunning inroads, and mainstream forces of center-left and center-right wrestling for control of Parliament's two houses.
The story of the election in the eurozone's third largest economy was shaping up to be the astonishing vote haul of comic-turned-political leader Beppe Grillo, whose 5 Star Movement has capitalized on a wave of voter disgust with the ruling political class.
Another surprise has been the return as a political force of billionaire media mogul Silvio Berlusconi, who was forced from the premiership at the end of 2011 by Italy's debt crisis, and whose forces now had a strong chance of capturing the Italian Senate. His main rival, the center-left Pier Luigi Bersani, appeared headed toward victory in Parliament's lower house.
The unfolding murky result raised the possibility of new elections in the coming months and bodes badly for the nation's efforts to pass the tough reforms it needs to snuff out its economic crisis and reassure jittery markets.
"This has never happened before," said James Walston, a political science professor at American University of Rome. He predicted such a swirl of political chaos that new elections may need to be called as soon as the new legislature chooses the nation's next president this spring.
So nothing gets done, the debt continues to accumulate, and the financial system shambles ever-closer to the cliff's edge.
Just to be clear, Italy isn't wallowing that much more deeply in denial than France with its 75% marginal tax rate or the US with our monthly debt ceiling/fiscal cliff soap operas. It's just the latest example of what happens when a country goes broke but can't accept the fact - and is armed with a printing press to maintain appearances beyond what would be possible in a sound money world.
In the meantime, this isn't just a local story. Italy is the third biggest country in the eurozone and it owes German and French banks a ton of money. Chaos there is chaos everywhere. See the next chart, which tracks the Dow Jones Industrial Average as the Italian results came in towards the end of the trading day.