Greece, long the poster child for Western nations spending themselves to the brink of oblivion, must now move over – for Italy, which could be an even bigger problem if it isn’t careful.
Experts say Italy is now in danger of being consumed by its debt – and being the third-largest European economy and eighth in the world, it is said to be too unwieldy to be bailed out, particularly by a roiling Europe that’s dealing with unsustainable debt levels in Greece, Spain, Portugal and Ireland.
Like Greece, Italy is soon to lose its prime minister, Silvio Berlusconi, to the debt crisis. In coming weeks, Italian leaders will be trying to walk the same tightrope Greece’s leaders have: to institute austerity measures sufficient enough to keep the nation afloat and creditors at bay, but not so harsh that they set the nation aflame with citizen anger.
Skittish investors will tell the tale – and that, too, is unsettling, as many of Italy’s biggest are in France and Germany. That means the contagion could spread to France, while dampening Germany’s ability and eagerness to come to the rescue.
What’s going on? Perhaps nothing has summed it up as plainly and understandably as a Wall Street Journal editorial Wednesday titled “Europe’s entitlement reckoning: From Greece to Italy to France, the welfare state is in crisis.”
“In Italy, as in Greece, Spain and Portugal and eventually France, the welfare-entitlement state has hit a wall,” the newspaper writes. “Successive governments on the Continent, right and left, have financed generous entitlements with high taxes and towering piles of debt. Their economies have failed to grow fast enough to keep up, and last year the money started to run out. The reckoning has arrived.”
A recent Washington Post story on the troubles in Greece also inadvertently helped shine a light on Europe’s core problem – by quoting “a retired freelance journalist who was sitting at a market in the working-class Athens neighborhood of Psiri.”
She’s 58 years old.
Even the Chinese get it. One official was quoted recently, “If you look at the troubles which happened in European countries, this is purely because of the accumulated troubles of the worn-out welfare society. I think the labor laws are outdated. The labor laws induce sloth, indolence, rather than hard working. The incentive system is totally out of whack.
“Why should, for instance, within the Eurozone, some members’ people have to work to 65, even longer, whereas in some other countries they are happily retiring at 55, languishing on the beach? This is unfair.”
He’s right, but doesn’t go far enough. It’s a recipe for disaster.
And the entire world could get caught up in it.