In the summer of 2003 Europe found itself in the grip of its most intense heatwave for at least 500 years. Early estimates of the death toll proved to be too low. Statisticians and public health experts eventually calculated that more than 50,000 Europeans had died from the heat, of whom roughly 18,000 - more than one in three - were in Italy.
The coronavirus pandemic is likewise ravaging Italy with tremendous force. Although mortality rates are expected to increase in countries where the outbreak started later, the Italian death toll soared above 1,000 this week, much the highest in Europe. Elderly people are among the most vulnerable to the virus and Italy has Europe’s oldest population. Some 23 per cent of Italians are 65 or above.
In an effort to conquer the virus, Italy’s government this week imposed drastic quarantine measures that have emptied the piazzas of cities that are cornerstones of European civilisation. Like all museums, Florence’s Uffizi Gallery is closed. No one is throwing coins into Rome’s Trevi fountain. From inside the Vatican, Pope Francis live-streamed his regular Wednesday mass instead of greeting pilgrims on St Peter’s Square.
Apart from the threat to human life, Italy may be exposed more than other countries to what are likely to be the pandemic’s severe economic consequences. The potential repercussions for the eurozone, and the EU as a whole, can hardly be exaggerated.
The pandemic is already a test case of Europe’s unity and political will, and it could get a lot worse. Without resolute, co-ordinated action from all EU governments and institutions that go beyond the market stabilisation and liquidity measures announced on Thursday by the European Central Bank, the survival of Europe’s monetary union may be at risk for the second time in a decade.
Among the eurozone’s 19 members, Italy stands out as the one that never fully recovered from the sovereign debt and bank crises that swept across the currency union after 2010. Italy’s manufacturing sector shrank by a quarter in that crisis. Many of its banks, loaded with government debt, remain fragile.
The roots of these weaknesses go deeper. During the 20 years of the euro’s existence, Italy has recorded next to no economic growth. Low labour productivity, an inadequate education system, an inefficient judiciary, corruption and organised crime are problems with a long history. Since the late-20th century Italy’s public debt has been worryingly high. But whereas before the 2010 crisis it amounted to a little over 100 per cent of gross domestic product, now it is approaching 135 per cent of GDP.
From a public health point of view, Italy’s emergency measures are essential. But they carry risks for the multitude of small, family-run businesses that depend on daily contact with customers and cash transactions that are drying up. Giuseppe Conte, Italy’s prime minister, said on Wednesday that the government was setting aside €25bn, or about 1.4 per cent of GDP, to protect the economy against these threats.
However, prominent economists such as Lorenzo Codogno, a former director-general of Italy’s Treasury, and Ashoka Mody, a Princeton University professor, doubt that this will be enough. They think the risks from the pandemic are so high that Italy, the eurozone’s third-largest economy, should request immediate financial assistance from the eurozone bailout fund and maybe the IMF.
Uppermost in everyone’s mind is the thought that, if Italy were to need help, the cost might run to hundreds of billions of euros. Almost certainly it would be no straightforward matter to win the approval of other European governments, divided as they are over eurozone reform, refugee policies and other issues touching on national sovereignty.
The 2010-13 bailouts for Greece, Ireland, Portugal and Cyprus required these countries to sign up for “adjustment programmes” - austerity measures and structural reforms dictated by their creditors. But Italy would surely rise up in furious protest at any such conditionality, on the not-unreasonable grounds that the nation could hardly be held to blame for the pandemic.
However, the politics of European bailouts are awkward, to put it mildly. Rescue measures agreed during the sovereign debt crisis stirred much resentment in debtor countries, where politicians and voters complained about what they saw as the intrusive, humiliating supervision of foreigners. But these measures also stirred up anger in creditor countries such as Germany, Finland and the Netherlands, indignant at forking out billions for supposedly feckless neighbours.
All in all, the bailouts left a legacy of rightwing nationalism, anti-establishment populism and an unwillingness to go the extra mile for the EU that could make large-scale financial assistance for Italy a politically explosive proposition. The recent failure of governments to agree the EU’s 2021-27 budget illustrates the point. The sums of money in dispute were mere fractions of each government’s national budget, but no leader felt able to risk the wrath of voters at home by making concessions.
As for Italy, the risks are real, but outsiders often underestimate the resilience and resourcefulness of Italian society. Since 1945, few western European countries have had more experience of crises that threaten social peace and national unity.
Terrorism from both the far-left and far-right, mafia violence, the collapse of party political systems, rampant inflation - Italians have gone through a great deal over the past half-century. What they badly need, during this pandemic, is support and solidarity from the rest of Europe.
Tony Barber is Europe Editor of the Financial Times.
Financial Times