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Editorial Raising wages is the solution to Italy’s descent into recession

ITALY, the third largest economy in the eurozone, has slid into recession.

In the cold language of the country’s statistical authority ISTAT: “On the demand side, there is a negative contribution from the national component … and a positive contribution from the net foreign component.”

In plain language, domestic demand — the amount of money Italian families have to spend on the necessities of civilised life — is down while exports are up.

The contours of Italy’s slide into recession tell us a lot about the nature of the European Union. 

The problems of Italy’s skewed economy have deep historical roots but its present problems are intimately connected to its membership of the eurozone and the architecture of the EU which privileges the stronger exporting countries of northern Europe.

ISTAT revealed that in the fourth quarter of 2018 the country’s gross domestic product decreased by 0.2 per cent compared to the previous quarter.

Over the year as a whole Italy’s economy grew by a weak 0.8 per cent. Not exactly vigorous but then the two biggest economies in the eurozone — Germany and France — did not do that much better at 1.5 per cent.

In Britain we are getting accustomed to the rising toll of high street shop closures as the contraction in demand worsens. 

This is not just a British problem but rather is systemic. Retail sales in Germany fell by 2.1 per cent for substantially the same reasons as in Italy.

Working-class incomes have been hit by the Hartz “reforms” introduced by the social democrats which — from near a generation ago — put the squeeze on unemployment and social security payments and were designed to grow the low wage component of the labour market and thus force down pay levels as a whole.

Italy has the highest debt of all EU countries, with the exception of Greece, whose economy has been devastated, as the IMF now accepts, by the austerity-extra diktat of the Troika. 

One indicator of deepening crisis is indebtedness. But Italy’s public debt is not the penalty for original sin but rather the inevitable consequences of the political and economic choices made by a succession of governments, nominally of differing political colours, but all bound into the neoliberal consensus.

A blame game is under way with the big business mouthpieces in the media placing main responsibility for the recession on the new populist Five Star/Lega coalition. 

Five Star’s Luigi di Maio in turn blames the previous government which he says lied to the Italian people.

Italy’s political crisis — temporarily moderated by the paper-thin EU-critical policies of both parties and by their electoral pledges to reverse a pension law and offer a limited guaranteed minimum income — has resumed with the government partners falling out over whether or not to sign up to the EU’s support for Trump’s Venezuela imperialist regime-change strategy.

From widening sectors of Italy’s plural left the growing consensus is that all governments of the last two decades have been complicit in the creation of this crisis. 

One expression of the changing mood in the working-class movement is the election to the leadership of the CGIL trade union confederation of metal workers’ leader Maurizio Landini.

The government gave in to EU opposition to its mildly reflationary budget. The impossibility of meeting its electoral commitments without challenging the institutional power of the EU that membership of the eurozone entails gives it little room to manoeuvre.

As our experience shows, the EU cannot allow for a loosening of its structures without risking an explosion of expectations that have been kettled by a submission to the austerity policies that its treaties enforce.

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