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4/21/06

Hudson Institute: The European Nightmare - by John O'Sullivan

For the full report go to the Hudson Institute or click on this link

The European Nightmare - by John O'Sullivan

Wherever you look today in Western Europe today, the political diagnosis is the same: paralysis. For Italy, the popular vote percentages in last week's elections say it all: Silvio Berlusconi's outgoing conservative coalition won 49.7 per cent of the total vote and the incoming center-Left coalition led by former "Eurocrat" Romano Prodi gained a victorious 49.8 per cent! Italy is divided right down the middle politically. Under the rules of the Italian constitution—which give the winning party additional seats—Prodi will be handed a secure parliamentary majority. But that will not in fact remedy the stagnation of the popular vote. Prodi's coalition is so divided between former Christian Democrats, former communists, and still-faithful communist true believers that it cannot unite around any reform program that is seriously contentious. It opposed Berlusconi's modest labor market reform—temporary contracts for younger workers to reduce youth unemployment—in the election campaign. So there is little or no prospect of Prodi adopting the wider labor market flexibility, pension reform or tax cuts that Italy badly needs.Yet there is little or no public will—either among Europe's politicians or its voters—to swallow the necessary reforms. Most voters are in work and react like the French students. Many of the unemployed have been pauperized and naturally fear any reform because it might threaten their welfare payments. And political and intellectual elites are in the grip of anti-capitalist theories that treat job flexibility and tax cuts as "barbarism."

Faced by this clash between what the economy needs and what the voters will accept, European politicians act like Romano Prodi. Almost his first words after being elected last week were a promise to help revive the European constitution stalled by hostile votes in France and Holland. It seems an odd priority for an Italian leader.

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