Finally, Berlusconi's Departing -- But That Won't Help the Eurocrisis Unless Austerity Plans Exit, Too

Berlusconi’s exit –though welcome -- will not solve Italy’s problems. Forced austerity measures are preventing investment in precisely the areas needed for recovery.
November 11, 2011

What exactly is the eurozone crisis? Is it a financial crisis? An economic crisis? Actually, it’s a growth crisis. And as such, it must have growth solutions. Instead we are being bombarded every day with theatrical new developments (Papandreou’s referendum, Berlusconi’s wavering on reform and elections) that would make us think that it is all the fault of some corrupt and/or lazy politicians. Or the result of Europeans, and their governments, refusing to live within their means. The solution, we are told, is better politicians and belt-tightening.

We are told, for example, that Italy’s enormous debt (118% of GDP), has caused the “markets” to doubt the country’s ability to pay it back, causing the interest it pays on its bonds (the way it funds its debt) to rise to an unsustainable level (7% on November 9th). That rate, we hear, brings Italy to the ‘tipping point’ of default, and will cause it to exit the euro. Pundits claim that in order to “save” Italy, almost all the funds in the European Financial Stability Facility (EFSF) would need to be used (1 trillion euros). That figure is so big that it is deemed not only “too big to fail,” but also ‘”too big to bail out.”
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