MADRID: Imagine walking into a store and paying for your goods in one currency while the person next to you pays for his goods in another currency. Two currencies in use at the same time in the same places.
This dual currency scenario is exactly the one being offered by political parties in today’s general election in Italy, where the state of its economy and poor growth are the only issues that really matter to most Italians.
Right now, Italy is one of the 19 European Union nations that uses the euro as its currency, abolishing the use of the lira on New Year’s Day 2002. And right now, Italy is in economic trouble. Its unemployment rate stands at around 11 per cent overall — but for those under the age of 24, one person in four has no work. And while some of its businesses are booming, that hasn’t meant new jobs for more. If there are new jobs, they tend to be temporary or part-time — not enough for workers to make ends meet.
High level of debt
Italy too has borrowed a lot. For every €1 (Dh4.5) in its economy, it owes €1.33 elsewhere. It’s that high level of debt that has bankers at the European Central Bank and economists at the European Union worried. Only Greece has a higher debt level — and it needed a series of bailouts to rescue its economy.
Borrowing and overspending nearly destroyed many economies across Europe in the wake of the global financial crisis. That’s why all the 19 nations that use the euro and the other nine EU states that use their own currencies, agreed nearly a decade ago to the “Fiscal Compact” — an agreement that limits their spending and borrowing.
Now, that agreement is the main issue for voters as they head to the polls to elect a new Chamber of Deputies and a new Senate of the Republic.
Former prime minister Silvio Berlusconi leads the Forza Italia, a centrist party with allies on the right. The party and its smaller allies, the Northern League and Brothers of Italy are likely to try and form a coalition to rule — but the difficulty is that they are a little short on support and any government must have a majority in both the lower Chamber of Deputies and the upper Senate. Together, all three parties have about 30 per cent support
Berlusconi wants to re-introduce the lira, have both currencies in place at the same time. The lira would be used by Italians for day-to-day use; the euro would be used by tourists and for Italy’s dealings beyond its borders.
He’s also proposing a flat income tax rate of 15 per cent, and is offering a guaranteed income of €1,000 (Dh4,486) a month for all. Even pet owners would catch a tax break.
The smaller parties want to get out of the euro altogether. But all three want to renegotiate the terms of that Fiscal Compact to allow them to borrow and spend more to make their economy grow.
But it’s not just the right who are proposing tinkering with the Fiscal Compact. The populist Five Star Movement, which has around 29 per cent support, wants to renegotiate that agreement and says that if there’s no movement, it will hold a referendum on continuing to use the euro. It’s planning a guaranteed income of €780 monthly.
The outgoing government of Matteo Renzi and the Democratic Party stand at around 20 per cent support in polls. Renzi too wants to loosen the Fiscal Compact and increase spending to boost job and productivity. While in office, he had proposed a series of constitutional reforms that would make Italy easier to govern and modernise its economy. Those were rejected in a referendum in December 2016, and support for his party split and has fallen.
Trying to make ends meet
So where does all of this leave ordinary Italians trying to make ends meet?
Roberto Biondi’s 89-year-old mother who has Alzheimer’s is housebound in her Herculaneum home and no longer recognises her son. She is also the family’s main breadwinner. Her monthly state pension of €800 covers her own living expenses, those of Roberto, and her grandson, both of whom are unemployed and have little hope of finding jobs in Italy’s underdeveloped south.
“I have no idea how I will cope when she dies,” said Roberto, 53, as he shopped for food in the coastal town under the shadow of Mount Vesuvius. He receives no benefits of his own. “I am poor. I am not ashamed to admit it, there are millions of others like me in Italy. This country isn’t working.”
Today’s election is likely to result in no party being able to form a government straight away — and that will only prolong the woes for millions like the Biondis.