Will get you Greek euro contagion to Italy?

09.07.2015
Will get you Greek euro contagion to Italy?

Beppe Grillo, a comedian and leader of the populist movement Italian "Five Stars" was so happy with the decision of Alexis Tsipras to announce a referendum on the bailout last weekend that quickly decided to travel to Greece for the occasion, writes The Financial Times.

 

"Power to the people, not banks," Grillo wrote on his blog, announcing that it would be in Syntagma Square in Athens on Sunday to cheer the embattled Greek Prime Minister.

 

The enthusiasm of Grillo highlights one of the biggest threats that the Greek crisis poses to Italy and the Government Matteo Renzi: possible encouragement to the growing caste of anti-European political parties in the country and undermine the political power and program the young reformist prime minister.

 

"From an economic and financial point of view the situation is manageable," says Sandro Gozzi, a top adviser to Renzi on European issues. "But this is about politics. At a time when we want to strengthen the European Union and to move towards greater economic unity, losing pieces along the way is something that worries us greatly. "

 

Enrico Letta, a former prime minister of Italy, told the Catholic newspaper Abner that the Greek crisis could potentially "pave the way for the establishment of populism" in the third largest economy in the euro area - especially if tribulations of Greece spread and stop, initiated recovery of Italy.

 

Vincenzo Scarpetta, an analyst at the think-tank Open Europe, agrees with the argument. "Italy is probably one eurozone country where political contagion will be the strongest," he says. "If Greece leaves the euro, then its membership is not irreversible," he warned.

 

Grillo's party is now the second most powerful in Italy, representing almost a quarter of voters, according to the latest opinion polls, and is particularly excited by the Greek vote, because she has long wanted Italian referendum on euro membership.

 

Many other parties have also shown sympathy for Tsipras, leaving Renzi, leader of the center-left Democratic Party, in relative isolation because of its support for a positive vote on Sunday.

 

This state of affairs is extremely unloved because for decades the Italians are among the staunchest supporters of European integration. But years of economic struggle led many of them to reconsider.

 

According to a Pew Research Center, presented last month, 56% of Italians want to keep the euro as their share is lower than in Germany, France and Spain. Around 64% of Italians look favorably to the EU, but only 11% believe that economic integration has strengthened their economy.

 

Matteo Salvini, leader of the resurgent Northern League, the third most powerful party in Italy, said this week that he supports the negative vote in Greece, because "you can not humiliate people," although he does not support the 'unilateral' leaving Italy the single currency.

 

Among the extremes of the political Spectrum is the right leader Georgia Meloni, which compared with European institutions "committee of the credit sharks" and the left leader Niki Vendola decried "social butchery Berlin and Brussels, which destroyed the European dream."

 

Meanwhile, Silvio Berlusconi, the former prime minister and leader of the center-right "Forward Italy", the fourth largest party of Italy was forced to intervene to clarify its position on the situation in Greece after some party members seem tempted Tsipras support.

 

Berlusconi, who believes that was ousted from power in 2011 as a result of a foreign conspiracy, said Tsipras represents "the worst kind of left, anti-capitalist mix of demagoguery and ideology, leading to disastrous consequences."

 

Source of comfort for Renzi in recent weeks is that the greatest potential threat to Italy - investors selling their Italian bonds, which would lead the country to financial distress in 2011, now seems unlikely.

 

Although their profile grows, anti-European political forces in Italy remain deeply divided and do not seem likely to become a convincing threat to Renzi in the near future.

 

They can find and the victory of Tsipras might be poisonous: if detachment from Brussels lead to further economic turmoil and chaos in Greece, it will undermine the attractiveness of such arguments in Italy.

 

"The Greek people do not seem very happy at the moment," said a senior Italian representative. "One is to provide moral support and sympathy of SYRIZA and say" give the Germans a lesson "when you're thousands of miles. Quite another to follow their example in Italy and to get into the same mess. "

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