An extensive discussion about electoral changes will hinder economic reform, comments Münchau in his FT column.
I do not feel strongly about the various [voting] systems. Each has its drawbacks. The reason I share the scepticism about the court’s decision is its likely impact on the Italian economy. It has not grown in real terms since 2001. Real investments are a shocking 50 per cent below what they should be by now if the economy had remained on its trend before euro entry. The national debt exceeds 130 per cent of gross domestic product, and will continue to increase over the next few years. In a situation like this, the last thing anybody needs is an all-absorbing discussion on electoral reform.
I still see the best hope for Italy in the radical reform agenda set by Matteo Renzi, the mayor of Florence. Mr Renzi had previously favoured a French-style voting system, with two rounds of voting, precisely because he wants clear majorities for his agenda. The court’s verdict has essentially deprived him of the ability to exert pressure on Mr Letta and force early elections. Since he took over last summer, Mr Letta’s government has tinkered with taxes, shifting them from one side of the economy to the other, but has failed to provide a coherent agenda for economic recovery beyond warm words. His government’s economic policy amounts to keeping one’s head down and pretending that one adheres to European deficit rules. This battle looks progressively hopeless – as the economic recovery remains elusive.
What I like about Mr Renzi is that he offers a different policy mix – reforms in exchange for a temporary overshoot in the deficits. I doubt it can happen in any other way. But I am also beginning to doubt that it may happen at all.
Italy’s debt could be perfectly sustainable, even at current levels, if moderately strong growth were to resume soon. If not, the country could eventually come to be regarded as insolvent. It is not the job of a constitutional court to solve economic problems. But it has made this already formidable task a good deal more difficult.
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