The incredible rise of Beppe Grillo’s Five-Star Movement in Italy has left the markets in turmoil.
With growing calls for austerity measures to be curbed, Ireland and the EU’s worst-hit countries could benefit, says Kyran Fitzgerald
Italy’s exasperated electorate has spoken and the financial markets have responded in dismay.
The strong performance of Silvio Berlusconi’s centre-right alliance combined with the runaway success of Beppe Grillo’s Five-Star Movement has spooked the markets.
Ahead of the poll, Berlusconi had appeared shaky, a 76-year-old in decline, while Grillo’s movement was seen as vibrant but unlikely to upset the apple cart, with around 15% support in the polls.
Berlusconi ended up polling 30% while the Five-Star Movement scored a stunning 26%, propelling 162 novice politicians into the parliament.
The Milan stock market tanked and the euro fell below $1.30 as participants fretted about a return of crisis to the eurozone.
The reaction abroad has been largely negative. The Economist suggested that “the people of Italy have decided to avoid reality” by “rejecting not just German-imposed austerity, but the entire reform agenda”.
Grillo was compared by one writer in Britain’s Spectator magazine to Mussolini, while Italy’s president, Giorgio Napolitano, pulled out of a meeting with the Social Democrat leader Peer Steenbruck after the latter condemned Italian voters for backing two “clowns”.
Beppe Grillo is 64, bearded, and with a luxuriant mop of grey hair. He is an accomplished rabble rouser and an adept user of the internet. His blog has become one of the most viewed in Europe since its launch in 2005.
He has half a million followers on Twitter — his splenetic utterances have clearly gathered a willing audience.
Born in Genoa, by the Mediterranean, Grillo made his name in the 1970s in TV variety shows, after he was discovered by Pippo Baudo — ‘Superpippo’.
In 1980, tragedy struck when Grillo was involved in a car crash in which three people died. He was convicted of involuntary manslaughter — as a result, he did not stand for parliament.
His career resumed until he lambasted the socialist prime minister Bettino Craxi on TV. Craxi had been visiting China and Grillo said: “If the Chinese are all socialist, who do they steal from?”
Grillo was exiled from Italy’s TV stations, forced to pursue a career in theatres and in outside public spaces. Craxi was later convicted of corruption, dying in exile, on the run from the law.
The internet proved Beppe’s route back to centre stage. His hatred of former prime minister Berlusconi and his bunga-bunga politics propelled him into political life.
While Grillo is contemptuous of the political establishment, he does share Berlusconi’s opposition to the austerity policies dictated from Brussels and Frankfurt.
He is also pushing for a referendum to be called to decide whether Italy remains in the eurozone. An Italian departure would be seen as a crushing blow to the euro.
Grillo established his Five-Star Movement just five years ago. While he is the party’s undisputed leader, it has no party hierarchy, no offices, and no official funds structure.
The comedian has made clear that he will not join forces with the centre-left Democratic Party, which scored a wafer-thin win in the elections.
He has described its leader, Pier Luigi Bersani, as a “dead man talking”.
Five-Star is part of an anti-establishment wave that propelled the left-wing Syriza movement centre-stage in Greece and witnessed the emergence of right-wing Ukip in Britain. The concern is that this wave could sweep away traditional centrist politicians in Europe’s crisis regions.
The markets had anticipated that Bersani would join forces in government with outgoing prime minister Mario Monti, the technocratic professor and former European Commissioner installed at the behest of Angela Merkel in a bid to halt financial meltdown.
But such establishment dreams have been dashed. Italy appears headed for a period of deadlock. One possibility is a minority Bersani-Monti government supported on an issue-by-issue basis by the “Grillinis”, some of whom indicated they would back the left in return for implementing reforms, including a crackdown on corruption, measures to tackle youth unemployment that now runs at almost 40%, and an opening up of the prof-essions to competition.
Grillo may struggle to exert control over his army of political neophytes. In truth Grillo’s emergence, while deeply unsettling for the markets, could have beneficial side-effects, both for Europe generally and for Ireland in particular. However, it also threatens to prolong the eurozone crisis.
Already, some in Brussels and at IMF headquarters in Washington questioning the politics of austerity and wondering why the squeeze needed to be placed so hard on Italy. True, its public debt at almost 130% is enormous, but the country’s deficit is modest, while national private wealth dwarfs public indebtedness.
The Economist has called for an easing in austerity but, for countries such as Italy to step up reforms of the public service, professions, and other lagging areas of the economy. French president François Hollande will feel emboldened in his calls for an easing in the fiscal squeeze in financially solvent EU countries.
A move in this direction would be music to the ears of export-dependent Ireland which, as current holder of the EU presidency, finds itself in a position of influence.
Commission president José Manuel Barroso was spreading the compliments around like confetti at this week’s Ibec conference.
Brussels needs a good news story.
In the next week or so, the issue of extending the term of troika loans out to Ireland and Portugal falls due for consideration.
Some €10.5bn falls due from Ireland in 2015 and 2016. An extension in the term could produce benefits far greater than those seen in the much touted promissory note deal, according to Goodbody economist Dermot O Leary.
Time for the good boys in the class to stick their hands up.
Speaking in Munich this week, ECB president Mario Draghi dropped a heavy hint when he called on EU countries to step up their support to fellow states in difficulty while adding that trust was vital to binding these countries together.
The message is clear: Play ball and press ahead with reform and your wealthier brothers will step up their assistance.
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