Italy's Vulnerable Economy Key Player in Election Vote
Italy may have escaped the ferocious grip of the eurozone debt crisis under Mario Monti's rule, but the country heading for the polls is still bogged down in recession and vulnerable to political turmoil.
The buzzword on every candidate's lips is "spread" -- the differential between Italian and benchmark German bonds -- a term unknown to many here two years ago, but now used to stir up public sentiment over the state of the economy.
An indicator of investor confidence in Italy compared to the financially virtuous Germany, it peaked under former prime minister Silvio Berlusconi -- forcing the billionaire out in 2011 -- and eased off again under Premier Monti.
With the support of the European Central Bank (ECB), Monti's government of technocrats managed to restore Italy's credibility on the international stage and among financial markets, saving the country from the brink of bankruptcy.
"The government had to act in one of the most difficult periods of the Italian republic," said Alberto Barcella, head of Italy's main employers lobby Confindustria in Lombardy, the country's richest and most industrial region.
"In that context, I think it did as well as it could," he said, pointing to pension and labor market reforms Monti had to fight tooth and nail to get.
A biting austerity policy aimed at clearing some of Italy's colossal debt -- which stands at two trillion euros -- and balancing the public accounts, came with a high social cost and saw many complain Monti's medicine was too bitter.
Italians also resented the introduction of a property tax, which has played a significant role in the campaign: Berlusconi, currently second in the race, has promised to refund it, to his rivals' dismay and the markets' horror.
Taxes in general have also become a particularly sensitive issue amid a series of financial scandals which have rocked both left and right, from the Monte dei Paschi di Siena bank debacle to turmoil at industrial giants Finmeccanica and Eni.
It is also difficult for Italians to believe the official government line that the economy will soon bounce back and return to growth by mid-2013, especially after the official statistics agency said this was "too optimistic".
Italy has had near-zero growth for 14 years, the economy contracted by 2.2 percent in 2012 and the latest statistics showed that the beleaguered country is struggling to pull itself out of its longest recession for 20 years.
It is also the only country in the eurozone other than Portugal where real Gross Domestic Product per capita has gone down since the euro was introduced.
According to a study by Italy business intelligence company Cerved, 104,000 businesses were forced to close their doors last year due to the crisis.
Unemployment has also hit record highs, affecting 11.2 percent of the workforce in December -- 36.6 percent of young people aged 15 to 24 -- and it has fueled resentment against a political class slammed as corrupt and greedy.
Former EU commissioner Monti, who had initially resisted launching himself into the electoral fray, changed his mind in December, saying he had to protect sacrifices made by Italians and prevent the debt crisis from flaring up again.
The country's European partners "have had enough of an Italy which puts itself, the eurozone and Europe at risk through its political fragility, its inability to take decisions and its financial indiscipline," he said last week.
Media magnate Berlusconi's bid to become premier for the fourth time and his People of Freedom (PDL) party's stellar rise to nip at the heels of the centre-left in the race, has unnerved some financial watchers and the markets.
The outcome of the vote is still far from certain, but many fear a return to political and financial instability in the eurozone's third largest economy, which could lead to a bailout request or trigger contagion within the eurozone.
The best outcome, analysts say, would be for the front-running Democratic Party (PD) to ally itself with Monti's centrist coalition and give him a key role such as finance minister, a move sure to reassure international investors.
Source: Agence France Presse
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