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BERLIN — Günther Oettinger is right. Like it or not, markets do decide how people vote.
Just ask the Greeks.
In early 2015, still intoxicated by their resounding election win, the leaders of the leftist Syriza party made good on their promise not to comply with the terms of the country’s bailout.
After months of chest-beating by Yanis Varoufakis, the country’s Marxist finance minister, Greece’s already-dire economic situation worsened. Five months after the leftists took over, market pressure forced them to shutter the stock market, close the banks and implement capital controls.
In an attempt to save face, Prime Minister Alexis Tsipras called a referendum over whether Greece should accept the bailout terms. The No vote won with over 60 percent.
Instead of embracing the poll’s outcome, however, Tsipras fired Varoufakis. To keep the bailout funds flowing, Tsipras set about implementing everything the EU and other creditors had been demanding for months with the zeal of a convert. The reason? As tough as the bailout terms were, the alternative — default and ejection from the euro — was worse.
All that Tsipras and his band of wannabe communists achieved was to derail Greece’s fragile recovery and increase its bailout tab by tens of billions of euros.
Italians may opt to learn Greece’s lesson the hard way. If they do, there’s a good chance the euro won’t survive. Considering the difficulty Europe had coping with Greece, a country the fraction of Italy’s size, there’s little hope the common currency could withstand such a crisis.
The consequences of such a scenario would obviously be catastrophic, not least for Italy, whose savers would see the value of their assets decimated if the country reverts to the lira. Italy’s massive debt load, now at €2.4 trillion, would continue to balloon as its borrowing costs surged, assuming it could even find investors.
That’s why Europe’s leaders should perhaps be thanking Oettinger for speaking hard truths instead of scolding him like a wayward schoolboy. Given what’s at stake for Europe in Italy, the real question is why Oettinger was the first one to say anything.
That European leaders’ first instinct on Italy is to stand on the sidelines shows just how hollow the EU’s political foundation is and how feckless its political class can be. As with the Brexit referendum, Brussels’ strategy appears to be to say nothing until it’s too late.
Most puzzling is European Commission President Jean-Claude Juncker’s reaction to Oettinger’s comments. It was Juncker, after all, who declared his Commission would be “political,” a standard he appears to apply only to himself.
“Italy deserves respect,” Juncker said in response to Oettinger’s remarks.
Yet by being honest and not hiding behind the usual political double-speak and platitudes that dominate EU pronouncements, Oettinger is showing respect.
One can bemoan the reality that decades of overspending left Italy beholden to financial markets. As Greece proved, however, pretending otherwise won’t alter the outcome; it merely worsens the reckoning.
Italy’s populists have seized on “the German” Oettinger’s comments as further evidence of Europe’s heavy hand.
“I’m not afraid,” a defiant Matteo Salvini, leader of Italy’s League, wrote on Twitter.
If Italy’s borrowing costs continue to surge, its banks teeter and investors flee the country, he and the rest of Italy soon will be.