The second point is less well known, but even less controversial: recent polls show that 60-72% of Italians favour the euro. Some believe the single currency safeguards their savings, while others regard it as an emblem of Italy’s status as a founding member of the European Union. But if motives differ, the balance of public opinion does not.
Bowing to this reality, the coalition partners have now dropped the idea of abandoning the euro, expunging the possibility from their “contract” and respective websites. Paolo Savona, a diehard opponent of the euro, has been denied the finance ministry. But Carlo Cottarelli, whose proposed appointment at the head of a technocratic government would have disenfranchised a majority of voters, has also been denied the reins of power. Appropriately, given the election result, Italians now have their populist government and their euro, too. [...]
In fact, the argument for a measured fiscal stimulus is sound – just not the kind of fiscal stimulus the League and M5S have in mind. An economy in Italy’s condition needs “two-handed policies”: supply-side reforms of labor and product markets to boost productivity and international competitiveness, accompanied by demand stimulus to prevent the uncertainties of reform and the surrounding political noise from depressing spending. Although Italy has a heavy debt burden, it also has a modicum of fiscal space, given low interest rates and a primary budget surplus.
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