Matthew Lynn Matthew Lynn

Don’t blame the populists for Italy’s chaos

Bond yields are soaring. Stock markets are tanking. The banks are looking wobbly, and money is starting to drain out of Italy. To listen to the mainstream commentary on the Italian crisis part 782, you’d imagine that a wild and irresponsible ‘populist’ government had just been tamed by the financial markets. And that once some sensible suits backed by the IMF and the EU take back control in Rome order would be restored and everything will be back to normal.

The trouble is, that is not quite the whole story. In fact, the markets have already worked out that Italy is leaving the euro, at least in its present form. The debate is about when and how, and whether its departure is orderly or chaotic. And right now the ‘populists’ are winning.

It doesn’t take more than a few minutes with the statistics to work out that the euro has been a disaster for Italy. Its GDP hasn’t grown at all in the almost two decades since it joined the single currency. As its population has grown six per cent since then, GDP per capita has actually shrunk. Unemployment has soared, poverty has risen alarmingly, and its debts have soared, not because the government has been particularly profligate but because its economy has shrunk. For Greece and Spain, at least the euro meant boom and bust. Italy has just had the bust – and after twenty years, there is no reason to think that will ever change.

The plans proposed by the Five Star Movement and the League are, contrary to some of the analysis, perfectly sensible. Dramatic tax cuts, and a simplification of the system to two flat rates for both individuals and corporations, will reflate demand and improve collection rates.

Already a subscriber? Log in

Keep reading with a free trial

Subscribe and get your first month of online and app access for free. After that it’s just £1 a week.

There’s no commitment, you can cancel any time.

Or

Unlock more articles

REGISTER

Comments

Don't miss out

Join the conversation with other Spectator readers. Subscribe to leave a comment.

Already a subscriber? Log in