The hung parliament that has resulted from Italy's elections matters because the country is the third largest economy in the eurozone, is heavily indebted and in the 15 months under the technocratic rule of prime minister Mario Monti, did not go any real distance in its financial reform program. That a political consensus was even reached in 2011 to allow the appointment of Monti demonstrated the depths into which Italy was sinking. Yet with structural reforms barely started and no serious attempt at an austerity program to reorder the country's finances, it is now politics as usual. Italians have Silvio Berlusconi to blame for this unsatisfactory state of affairs, as indeed they have this maverick politician to blame for much else in terms of the financial debacle the country still faces. It was Berlusconi's withdrawal of parliamentary support for Monti that brought on the election and has effectively re-created the political deadlock which has so undermined Italy's financial standing. The difference, however, is that there is a new force in Italian politics, in the form of Beppe Grillo and his Five Star Movement (M5S) which won fully a quarter of the vote. Grillo campaigned on an anti-establishment ticket and won such support that, whether he likes it or not, he is now part of the political establishment with all the responsibilities that entails. The fact that Grillo is a comedian, who built his fame poking fun at Italian politicians, does not in anyway disqualify him from the political process. Berlusconi has run a good line in buffoonery for years. Yet the message a quarter of the Italian voters have given is not an encouraging one. Italy has flourished to a large extent because of its ability to ignore government and annoying things like taxes and regulations. Grillo's supporters have demonstrated that they were alarmed by Monti's, albeit limited, attempts to try and establish a cohesive and coherent financial system. Just as Berlusconi's Forza Italia led-alliance won Italy's first clear post-war mandate in 2001 on the basis of a popular reaction to a series of corruption scandals among established politicians, so Grillo has ridden to a position of power on a popular fear of genuine economic restructuring. The biggest danger is that nothing fundamental will now change. Political leaders will jockey for power, form a coalition and then see it fall apart sooner rather than later. Yet while Italy resumes its habit of revolving-door governments, the eurozone still far from recovered will be edged back into crisis. The worst case is an Italian debt default which would make the emergency measures applied to Ireland, Portugal, Spain and Greece look like sticking plasters when compared to the full-body splint that will be necessary to help Italy survive collapse. If the eurozone plunges back into turmoil, it will have a knock-on effect on other currencies and indeed on world economic recovery. Therefore, how Italy's newly-elected politicians choose to order their differences is of consummate importance to us all. Hopeful talk of a “Grand Coalition" seems wide of the mark. There are too many tough choices to be made for all political parties to risk associating themselves with austerity measures. And by running for power himself and being largely rejected, Monti has probably lost the credibility to resume his reform program. Berlusconi brought the technocrat down and the vote would seem to vindicate his action. Unfortunately, however, electors have chosen to revert to dangerous chaos, at the very time when Italy needs to be reorganizing itself to address its pressing financial and economic problems. These are dangerous developments.
