Madsen Pirie

The pundits have been spreading gloom about the Italian election results. “Worst possible outcome.” “Lack of strong government will spook the markets.” “No effective majority for reform.” And so on.  What “the experts” wanted was a strong government able to carry out the austerity measures imposed on Italy from Brussels (and maybe Berlin).  Yet a strong centre-left government led by ex-Communist Bersani would have been unlikely to bring the reforms Italy needs, such as the loosening of its labour market and changes to the costly public sector pensions system.  On the contrary, it might well have trod the road pioneered by Francois Hollande in neighbouring France, and back-pedalled on such reforms while pursuing an anti-business tax policy.

Italy may have been spared this fate by the indecisive nature of the result.  A wafer-thin Left majority in the lower house looks set to be matched by a narrow Right majority in the Senate, with both houses needed to rule effectively.  The EU-installed Mario Monti managed a bare 10 percent of the popular vote, while the joker in the pack (literally) has been ex-comedian Grillo with 25 percent.  There could be a Bersani-led coalition backed by Monti and Grillo, but it would be unstable, and still leave Berlusconi with a blocking majority in the upper house.  The most likely outcome seems to be another election soon, and after his dramatic comeback, a further Berlusconi government cannot be ruled out.  Now that really would tip the Eurocrats into hysteria…

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