Italy and Greece

talian Prime Minister Mario Monti’s comments in an interview published before he met with Chancellor Angela Merkel in Berlin went to the heart of his country’s problem. Austerity alone, he said, is no solution to the debt problem, and if Germany and European institutions don’t support Italy and help lower borrowing costs, “a protest against Europe will develop in Italy, also against Germany, which is viewed as the ringleader of EU intolerance, and against the European Central Bank.” His stance was hailed by many Greeks, who saw in it the opposite of what they see in their own politicians -- a lack of negotiation.

Once again, we exploit whatever supports our arguments while ignoring whatever works against them. In the case of Monti and his Greek counterparts, it is useful to look at similarities and differences. Monti has many advantages over Lucas Papademos, even though, like the Greek PM, he is not a politician and was called on at the last moment to apply an unpleasant austerity program. In this way, neither man has to fear the political cost of his policies; but whereas Papademos has to keep negotiating the length of his government’s tenure with the parties that half-heartedly support it, Monti knows that he has about two years in which to make the Italian economy more viable. The Italian prime minister has moved fast in introducing reforms, whereas Papademos’s predecessor, George Papandreou, was elected on a program that opposed austerity and he had a hard time acknowledging the need to change it.

Furthermore, Monti is able to make demands of Merkel and not the other way around: He’s the leader of a major country, like hers, and Italy doesn’t owe Germany. In fact, in a way, Germany has benefited from the crisis. Whereas Italy’s borrowing costs reached the same level that had forced Greece, Ireland and Portugal to ask for help from their eurozone partners and the IMF, Italy carried on borrowing. At the same time, Germany’s rate fell so low that people are paying it to hold German debt! In this way, Italy, Greece and other countries are subsidizing the German economy. (Let’s not forget, Greece is paying close to 5 percent interest on its partners’ loans.)

In short, the Italian prime minister took reform measures quickly, he was not forced to call for a bailout of his country, and today he can draw “red lines” and demand respect for Italians’ sacrifices. Greece’s leaders may have wanted the same, but their fear in the face of populism and their lack of confidence in their reforms resulted in delays, backtracking and in everything that threatens the sacrifices of the Greeks and the support of their partners.