Monday 24 July 2017

Change of regime in Rome is good news for us

Thomas Molloy

Thomas Molloy

SILVIO Berlusconi's decision to quit within weeks is almost certainly good news for Ireland and the rest of the eurozone.

It removes uncertainty in the markets and makes it less likely that Italy will try to access the EFSF fund, which helps to keep Ireland and the other bailout nations afloat.

The Italian prime minister has also opted to push through his austerity budget before leaving, which means that his departure will cause the minimum damage possible to the economy.

Yesterday evening, it appeared likely that the 75-year-old media tycoon's belated decision would spare us months of political instability.

But the experience of Greece is a reminder that nothing can be taken for granted any more -- especially when the main protagonist is a man who is world famous for his eccentric behaviour.

While Mr Berlusconi's governments will live long in the popular memory for the parade of showgirls and gaffes, the prime minister himself pursued a relatively conventional economic policy until recently and never showed any antagonism towards Ireland.

Where French President Nicolas Sarkozy has been openly hostile to this country at times and Germany's Angela Merkel has blown hot and and cold, the leader of the third-largest eurozone economy has appeared happy to stump up money to help Ireland.

It would be foolish for Irish policymakers to assume the technocratic government that is likely to replace Mr Berlusconi will be quite so benign.

Brutal

As Italians finally start to feel the pain associated with real austerity, Italians may well find themselves asking why they must also shell out billions of euro to prop up governments in Dublin, Athens and Lisbon.

Enda Kenny and Michael Noonan will welcome the extra stability that Mr Berlusconi's departure brings to the financial markets, but they are also likely to ponder on the power of the markets and the ECB to displace governments that fail to live up to their word.

The almost brutal way in which Europe's leaders have washed their hands of Mr Berlusconi shows that there is no longer any room for sentiment when it comes to the fate of any administration.

If a permanent fixture on the political scene for a decade can be thrown to the wolves, then every government -- including Mr Kenny's coalition -- must know that they are also dispensable on the high altar of fiscal rectitude.

The ECB could have stopped Italian bond yields from rising to unsustainable levels but appears to have sat on its hands, so forcing Mr Berlusconi to go. This makes it all the more important for our leaders to stick to their targets.

We have seen in Ireland that a new government can bring stability even if most policies remain similar to the previous government's. There is every reason to hope that something similar will happen in Greece and Italy in the months ahead.

Irish Independent

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