Heavy-handed pressure on Italy, Greece may yield little, analysts say
By Michael Birnbaum and Anthony Faiola,
BERLIN — As Europe’s financial crisis threatens to engulf Italy, a country that may be too big to save, top euro-zone officials have taken aggressive steps in recent days to whip errant members into shape.
From sending an international team to babysit Italy’s economic measures to threatening Greece with expulsion from the euro zone, French and German leaders are pushing as never before, and European Union officials have joined in. But their exhortations have provoked chest-puffing backlash from Italy and Greece, and analysts warn that heavy-handed pressure may do little to solve Europe’s short-term problems.
That was dramatized Wednesday in Greece, where another day of political deadlock yielded no resolution on who would become the country’s next prime minister despite warnings from European leaders that Greece will not receive its desperately needed bailout money until it resolves its leadership stalemate and approves the bailout plans.
European leaders are “fooling themselves if they believe there will be a fundamental change if there’s a new prime minister or new elections” in countries that have troubled political systems, said Fredrik Erixon, who leads the Brussels-based European Center for International Political Economy. “The institutions don’t have that much power to make changes.”
In recent weeks, with time of the essence, German Chancellor Angela Merkel and French President Nicolas Sarkozy have used a take-it-or-leave-it approach with Greece: take a bailout plan that commits the country to years of unpopular austerity and international oversight, or leave the euro zone and deal with the consequences. In Italy, the International Monetary Fund team’s coming to the country is a public admission that Europe no longer trusts Italian politicians to do what is necessary.
“Does Greece want to stay in the euro, yes or no?” Merkel asked last week. Sarkozy said that “not a cent” would be given to Greece if it didn’t take the bailout. And Jean-Claude Juncker, the head of a group of euro-zone finance ministers, called Greek Prime Minister George Papandreou “disloyal” for suggesting a popular referendum on the rescue deal. Officials have been less publicly pugilistic about Italy, but behind closed doors, German officials have been deeply reluctant to extend any assistance to Italy so long as the prime minister remains in power.
For countries where old notions of pride still have deep roots, the pressure hurts.
A new leader in Italy would be “put in place to the disrespect of Italians,” Prime Minister Silvio Berlusconi said Sunday, before he was forced to give assurances that he would step down after Parliament passes economic measures.
In Greece, the head of the opposition party, Antonis Samaras, spoke this week of “national dignity” in explaining why his statements, not his signature, should be enough to assure Europe that the austerity measures were “inevitable.” His resistance to acquiescing to European requests for written assurance are a major sticking point in the power transfer, Greek news reports have said.
And, in a more extreme reaction from the streets of Athens, protesters frequently compare Merkel to Adolf Hitler. Reminders of Germany’s Nazi past, and allusions to reparations that Greeks feel Germany owes them, come up frequently in angry conversations. And in a country that has withstood numerous foreign occupations in its history, outside interference quickly raises hackles.
Nor is it particularly effective where it matters, experts said. Over the past year, measures have been passed but not carried out by the lower-level officials charged with doing so because of intransigence and corruption, many in Greece have said.
“The European Union is based on the principle that all of its members can perform at roughly the same level,” if not economically, then in basic governance, said Daniel Gros, head of the Center for European Policy Studies, a Brussels think tank. “What do you do when you have a failed state? The E.U. is not made for that.”
In fact, aggressive remedies for Greece may have worsened Italy’s situation this week. The never-before-voiced suggestion that countries weren’t forever bound to the euro may have scared Greek leaders into submission, but it also scared bond markets into raising the price that Italy pays to borrow money to levels that forced Greece, Ireland and Portugal to take bailouts.
That’s precisely what European leaders didn’t want. Problems in the peripheral countries were always manageable — in the worse case, France and Germany’s hulking economies could swallow the cost of paying off the tiny ones. Italy, however, owes creditors $2.6 trillion — far too large an amount for France and Germany to backstop.
Hence the new pressure. When Merkel and Sarkozy broke protocol by smirking and rolling their eyes when asked about Berlusconi last month, some Italians thought it highly inappropriate, even insulting. But others insisted that Berlusconi deserved it and that the leaders’ reaction had served as a wake-up call to the Italian public. Berlusconi is deeply unpopular at home.
The dire situation calls for tough measures, but Berlusconi has little grounds on which to push back against Europe, some in Rome said.
“I think that if you are credible, it is possible to be aggressive,” said Giuseppe Mussari, president of Italy’s banking association. “If you are only arrogant, however, you should not be.”
Some suggested that international dismay over Italy’s situation played a role in Berlusconi’s pledge on Tuesday to resign after passage of key austerity and economic measures, as domestic support drained away in recent days.
“Thank you, G-20, thank you, E.U.,” said Beppe Severgnini, an Italian journalist and commentator.
Faiola reported from Rome.