Italy’s Missing Euro Debate

The euro was at the center of Italian political debate for years. But, as election day approaches, the issue has vanished from the stage.

Silvio Berlusconi arrives at the European People's Party Congress on March 30, 2017 in San Giljan, Malta. Sean Gallup / Getty Images

As the Italian president called a general election for March 4, the international business press presented a familiar narrative: Italy was the latest country where a popular vote threatened turmoil for the Eurozone. The Economist warned of “New Uncertainty for Europe,” while Forbes headlined “Europe Braces for Italian Elections.” One Financial Times columnist opined that the possible triumph of the Five Star Movement (M5S) and the hard-Right Lega would induce “a heart attack among international investors.”

As with Matteo Renzi’s failed referendum in December 2016, the international media has viewed Italy’s coming election through the lens of wider European politics, where it is framed as part of a narrative of rising populism. But the future of the Eurozone is hardly a central campaign theme in Italy itself. In fact, such a decisive question of Italian national life is notable by its absence, with even once-convinced Eurosceptics today retreating from calls for a break with the currency.

To get a hint of how this question has been turned on its head, we need only note the reinvention of Silvio Berlusconi. In 2011, as Italian premier, he was unceremoniously dumped out of office with the connivance of European officials, seen as a demagogue hampering the resolution of the Eurozone crisis. In 2018 he has been recast as a bulwark against populism in Europe, a re-designation blessed in recent days by Angela Merkel.

What is more, even the populists whom Berlusconi claims to be combating have abandoned plans for euro exit. Closer than ever to high office, M5S leader Luigi di Maio now defines himself against “extremist, populist, anti-European” politics. While his party spent the last decade calling for a referendum on euro exit, di Maio has now explicitly ruled out such a vote. The same is also true of the hard-right Lega, which has now joined Berlusconi’s own coalition.

With no force likely to enter parliament even contemplating a euro referendum, international investors need not crack out the defibrillators just yet. Yet Italy is also a country of weak economic prospects, and one whose longer-term commitment to the Eurozone — or at least, popular consent to it — really is in doubt. Polls suggest that public support for the euro is now weaker in Italy than in any other member state. Less than half of Italians consider the currency “good for the country,” and one-third favor a return to the lira, the country’s currency before 2002.

Most notable of all, in this picture, is the dramatic variation in support for the euro across the generations. This particular divide also points to something quite distinct from a Euroscepticism based on nostalgia or parochialism. For while the over-forty-fives favor keeping the single currency by a near three-to-one margin, among younger Italians there is a narrow majority for quitting the Eurozone. Hit hard by crisis, this generation feels unbound from the consensus that has united both center-left and center-right governments since the 1990s.

If young Italians’ doubts over the currency represent a wider alienation from institutional life, they are also intimately linked to the particular role of Europeanism in Italian public discourse. When Italy joined the Eurozone in 2002 its political elites promised that the currency marked a new era of stability and growth. Such claims proved hollow in the period after the 2008 crisis as youth unemployment soared as high as 40 percent. As the Italian economy fell into recession, euro membership meant austerity as well as fiscal and monetary limitations, which pushed it into a cycle of debt and stagnation.

Observing Italy’s poor productivity and weak infrastructure investment in the pre-2002 period, we can see that a return to the lira would offer no automatic solution to the country’s structural woes. But it is difficult to see any progressive development within the euro framework — particularly given its asphyxiating influence on Italian politics. Compliance with Eurozone rules has provided ideological cover for over six years of “technical” and “grand coalition” administrations. The currency itself has become identified with a mounting sense of democratic deficit.

Italy’s experience of the euro has exacerbated its pre-existing political turmoil. Far from a European cure for its domestic ills, the country has become a test bed for destructive reforms, imposed in disregard or outright defiance of popular consent. The euro has fed young Italians’ distrust for the centrist consensus and stirred insurgent forces on the right. Its governance regime has not just paralyzed government action, but undermined Italians’ faith in politics itself. Regardless who triumphs in the upcoming general election, this is a process that is likely to deepen.

The Dream of Europe

The euro was launched in Italy in the late 1990s on what can only be described as a wildly optimistic prospectus. In that period there was enthusiastic cross-parliamentary support for Eurozone membership, with most of the legwork to prepare its entry coming under the 1996–2001 L’Ulivo governments, a center-left coalition that was precursor to today’s Democratic Party (PD). For l’Ulivo, signing Italy up to the 1997 Stability and Growth Pact governing European Union member states’ budgets, and then entering the Eurozone itself, was also the embrace of “Europe” as a new vision of progress. For the ex-Communist elements of this coalition, the Marxist vision of a world without states and money had given way to the horizon of a single super-state and a single currency.

As former Communists allied with former Christian Democrats to form the PD, Europeanism provided an ideological glue, replacing the class-based visions of the twentieth century. From Communist leader Enrico Berlinguer’s 1980s rapprochement with European social democracy to the center-left governments of the 1990s and the embrace of the Third Way, the abandonment of social transformation within Italy went hand in hand with the adoption of euro-federalism as a political horizon. With the decline of the labor movement and rise of social market ideology, Italy’s left joined a host of European social democrats that saw Brussels as an ally in the fight against domestic forces of reaction. Embrace of the Eurozone was the latest stage in this ideological journey.

The path has continued to wind in recent years. This is epitomized in PD leader Matteo Renzi’s bid to remodel the political chessboard, replacing the left-right binary with one setting Europeanist centrists in opposition to “populist” Eurosceptics. If some of this imagery is borrowed from Emmanuel Macron, it is indicative of Italian elites’ longstanding faith that grounding Italy in some wider framework might mitigate or overcome its own assumed propensity to instability. From this perspective, “Europe” is the symbol of modernization and democracy, and its defense the vanguard of the effort to turn Italy into a “normal country.”

In fact, while the center-left often portrayed Silvio Berlusconi as the epitome of this same “abnormality,” they little disagreed on the question of Eurozone membership. Having returned to office in May 2001, the billionaire tycoon was quick to claim credit for the euro. That Christmas, Prime Minister Berlusconi had twenty million currency-converter calculators mailed to Italians, at his own personal expense, accompanied by a letter with his signature. Even in opposition during the center-left governments of the late 1990s, the tycoon had eagerly supported Italy’s membership: as he put it on March 25, 1998, “We [of Forza Italia] can take a good part of the credit for Italy entering the Euro: we have always shown our sense of responsibility.”

As Marco Travaglio has noted, Berlusconi at first hailed the euro as a force for order. After his victory at the May 2001 election he was at pains to assert his pride that Italy was joining under the guidance of a “great Europeanist” head of state. Indeed, president Carlo Azeglio Ciampi voiced the belief that the euro was, more than an economic project, a new dawn: its creation was

a historic event, the realization of a dream, synonymous with healing the economy, monetary stability, low interest rates, the transparency of goods and services, and thus greater freedom for consumers, but above all the birth of Europe as a political subject.

On January 15, 2002, just two weeks into the Eurozone era, Berlusconi told TV viewers “the euro works; this is an incontestable truth.”

Even in his most recent spell in government, Berlusconi, like the center-left opposition, portrayed the Eurozone as an outside guarantee regulating Italy’s economic woes. Speaking on February 22, 2009, the billionaire prime minister remarked:

If Europe is today able to respond effectively to the fallout from the financial crisis, through national anti-crisis plans, that is thanks to the stability of the euro and the restoration of budget flexibility.

But in reality the crisis pulled the binds of the euro even tighter. Unable to use monetary policy to erode its debts, or indeed to boost investment, the Italian government was left entirely at the whim of the European Central Bank (ECB) when the crisis struck.

Over the 2000s Berlusconi occasionally ventured that the actual moment of conversion to the euro had increased prices and reduced Italians’ savings, going so far as to term the currency “Prodi’s euro” in mocking reference to the former l’Ulivo premier. But it was the Eurozone crisis of the early 2010s that split him from the Europeanist consensus as investor confidence in the Southern European economies plunged. ECB chiefs Jean-Claude Trichet and Mario Draghi used the crisis to force out elected governments in both Greece and Italy, conforming to the simplistic dogma that the crisis owed to an excess of public debt that had to be paid off through budget cuts. They were cheered on by the PD opposition, which heaped blame on Berlusconi’s “irresponsibility.”

This was most symbolized in Trichet and Draghi’s August 2011 letter to the Rome government demanding sharp budget cuts, without which the ECB would stop buying Italian bonds. The letter was not so much an intervention to halt the crisis as a move to push Italy closer to the brink of crisis in order to impose political change. Already president Napolitano (a PD man and veteran of the right wing of the Communist Party) was lining up a government in waiting. Berlusconi had no tools to respond to the rising market pressure, and in November Napolitano appointed Goldman Sachs advisor Mario Monti premier in a cabinet of unelected technocrats. Berlusconi complained of a “coup.”

New Oppositions

Following the upheavals of 2011, the center-right began to rewrite the history of its attitude toward the Eurozone and the European Union in general. Berlusconi now presented himself as an opponent of the incautious Europeanism that had led the country into the currency, blamed on the Democrats alone. Just before his November 2011 ouster Berlusconi declared that “this strange currency has not convinced anyone”; by the end of 2012 he warned that “if interest rates don’t come down, we will be forced to leave the euro and return to our own currency in order to be competitive.” He later suggested that the lira be reintroduced alongside the euro, a suggestion slapped down from Brussels.

Although Berlusconi’s rhetoric acknowledged the falling public support for the currency, the center-right had no intention of challenging the existing Eurozone rules. From November 2011 until the February 2013 general election, Berlusconi’s party, like the PD, gave parliamentary backing to Monti’s administration. Even since that election Italy has seen a further five years of governments supported by the PD and elements of the center-right, first with then without Berlusconi. These governments have all conformed to a similar agenda, as ECB refinancing packages have imposed specific economic “reforms” from budget cuts to raising the pension age.

This situation did improve somewhat after 2015 as the ECB stepped up its purchase of Italian bonds, effectively a form of quantitative easing. The ECB nonetheless plans to halve this support after January 2018. This will cause interest rates on Italian bonds to rise, thus forcing the Italian government to cut back public spending to comply with the strict budgetary rules imposed by the Fiscal Compact. The country thus remains at the mercy of a budgetary policy imposed by ordo-liberal dogmas, regardless of what the voters choose on March 4.

The Eurozone’s narrowing of political choice builds on Italy’s long history of “technical” governments, separating economic policy from the will of the voters and raising executive power above the to-and-fro of party politics. Indeed, the cliché that Italy’s political system is chaotic conceals the more fundamental reality of a state machine resilient against popular pressure, in this also basing itself on outside guarantees. For five decades after the fall of fascism, it was the Cold War binary that maintained the solidarity of the Christian Democratic order, uninterrupted in its rule; after the 1990s collapse of this ersatz stability, the Eurozone offered centrist parties a new permanent governance regime.

The discrediting of this order over the 2000s provided the context in which the Five Star Movement emerged to challenge the establishment parties. Created in 2007–8, the M5S has long promised to kick out “the caste,” to sweep aside Berlusconi’s Popolo della Libertà (PdL) Party as well as the “PD without an L” led by Matteo Renzi. Beyond its strong anti-corruption rhetoric, from its foundation one of the M5S’s flagship policies was to revert back to the lira and to recover Italy’s “economic sovereignty.” With the Left imploding in 2008 (following Rifondazione Comunista’s support for a centrist coalition government) it was the M5S that appeared to be the main force for political renewal.


The forces that have fed the M5S’s rise are obvious. A lack of political alternatives, an entrenched and corrupt political class, and dire economic circumstances, especially for youth, contributed to widespread frustration. Unlike the elitist mainstream parties and state institutions barely receptive to pressure from below, M5S offered “direct democracy” to whoever wanted to join its ranks through its online voting system. It pledged to change not just outcomes but how politics was done in Italy, a message that seemed to resonate with a hard-up generation of young voters. Among under-forty-fives the M5S today enjoys more than one-third support. For many of this cohort, M5S is the answer to ongoing unemployment and, for 68 percent of eighteen to thirty-four year olds, being stuck living in the family home.

Beyond the yawning economic inequalities, the generational divide also correlates to an ideological split regarding Europe. After 1945 most Italian elites saw the European project as key to answering the country’s historic ills, and federalism as the highest mark of the country’s democratic and modernizing credentials. If some wartime anti-fascists like Altiero Spinelli expressed the desire for continental unity, this was later confected into a myth directly tying the rebirth of Italian democracy to euro-federalism. Tellingly, at the April 25, 2017, march commemorating the victory of the anti-Nazi resistance, the Milan PD carried EU flags and party banners colored in European blue and yellow rather than the national tricolore’s green, white, and red.

Such enthusiasm over the European project has a certain appeal among the PD’s pensioner base, but far less purchase among the young voters more likely to vote M5S (if they vote at all). Young people are not only more distant from the memory of the war and the initial promise of the European project, but also less attached to the centrist parties, who have in recent times proven unable to offer hope that this generation will do better than the last. Many younger voters have never seen anything except the current era of crisis, in both domestic and EU politics. In this sense it is unsurprising that they are far more Eurosceptic than their parents, across left-right divides.

Following these social trends, the call to leave the euro came easily to the M5S, especially in its initial protest movement phase. Originating with the V Day (v for vaffanculo or “Fuck You!”) demonstrations of the late 2000s, the M5S’s attempt to put two fingers up to authority fitted easily with resentment at distant EU and ECB power. This approach however often lacks political clarity, for the M5S has never outlined any plan for how exactly it would go about returning to the lira. This was neatly captured in a much-derided TV appearance by one M5S MP in December 2017, when she argued that a referendum on exit was necessary but couldn’t say how she would vote.

As the M5S draws closer to power it has tried to “mainstream” itself, in particular by taking a softer approach to the euro question. Having long been a member of the Europe of Freedom and Direct Democracy (EFDD) group in the European parliament (a hard-right grouping whose most prominent exponent is Nigel Farage), in January 2017 leader Beppe Grillo mooted a changed policy. He called on members to vote on joining Alliance of Liberals and Democrats for Europe (ALDE), the federalist group involving figures such as Guy Verhofstadt and the Liberal Democrats. However, after 78 percent of voters supported the plan, ALDE rebuffed Grillo, forcing a renewed embrace of Farage.

Even as it attempted to join ALDE, the M5S continued to demand a referendum on euro membership, but as March’s election nears it has backed away from this call. In September 2017 its prime ministerial candidate Luigi di Maio addressed the Cernobbio business forum, reassuring industrialists that he did not want an “extremist, populist, anti-European” government, and planned such a referendum only as a “last resort.” On December 18, di Maio stated that while he would opt for euro exit if it was put to the vote, such a referendum would only be necessary if the Eurozone failed to reform.

This shift was completed with the M5S program launched on January 21, which makes no reference to the European Union or Eurozone. With his party closer to power than ever, di Maio has chosen to defuse what could have been a bomb under his government. At the same time, even the M5S’s potential coalition partners on the right have backed away from this issue, reducing their Italexit stance to a condemnation of the euro’s failings.

The Far Right

As is the case in many European countries, the debate over the euro is warped by its association with a more general battle over cultural identity, in which the PD and its allies present doubts about the currency as a “populist” or “fascist” rejection of liberal cosmopolitanism. This does, in a sense, reflect the Italian far right’s perspective on the euro and the European Union. But the story of Italian nationalism is, as ever, more complex. Just as a PD euro-federalist like Patrizia Prestipino can speak of “defending the Italian race” by resisting multiculturalism, a far-right force like Fratelli d’Italia can present the tensions caused by the euro as a threat to a united European identity.

Across Europe, new political forces seeking to lay roots in former industrial heartlands have identified opposition to the euro as a means of undercutting the former left-wing parties on the “social” terrain, while also fitting deindustrialization and deprivation into a wider nationalist narrative. Marine Le Pen’s then-adviser Florian Philippot epitomized this well in the run-up to the 2017 French election, pushing a more social economic agenda alongside strong advocacy for euro exit. Before Italy’s March 4 vote we can see a nominally “left-sovereigntist” economist like Alberto Bagnai migrating to the Lega.

However, while even in recent days the Lega leader Salvini has termed the euro a “failed experiment,” Italy’s most prominent far-right party no longer proposes a firm break. This owes in particular to its pact with Berlusconi’s Forza Italia, with other smaller forces standing as the “center-right coalition” in the run up to the March 4 vote. Having promised Angela Merkel at the 2017 European People’s Party summit in Malta that he would “resist populism,” Berlusconi has integrated hardline reactionary forces into an electoral coalition (if not necessarily a governmental alliance) committed to keeping the euro.

While the Lega’s election campaign is hitting hard on race, migration, and the European Union’s handling of the refugee crisis, its prospects of office have demanded it pitch the Eurozone question into the long grass. With both this party and the M5S thus having abandoned their calls for a referendum (the far-left Potere al Popolo coalition is the only force to advocate “a break with the European treaties”) the main debate is over the terms of Italy’s membership. With no party proposing a substantive broader reform of the Eurozone, the key area of dispute is the Eurozone limit on budget deficits.

Declaring this a barrier to state investment, the Lega, like the M5S, insists that it does not recognize the 3 percent limit, and would advocate the next government spending its way to reducing the national debt. Meanwhile the PD has promised to “border on” the 3 percent limit by maintaining a 2.9 percent deficit to support investment. Berlusconi has at times sought to assert his responsible credentials; speaking in Brussels recently, he emphasized “the need to respect our commitments to Europe, including the 3 percent limit,” though he later added in an Italian radio interview that this limit should be respected “if possible.” As always, the old maestro’s strategy is to say all things to all people, keeping his options open.

Telling in this regard was La Repubblica’s January 28 coverage of a meeting between Berlusconi and European Commission president Jean-Claude Juncker. The tycoon had earlier in January integrated the Lega and the post-fascist Fratelli d’Italia into his coalition, ensuring that a government of the right would maintain Italy’s euro membership. At the meeting, however, he reportedly told Juncker that, having silenced these forces’ opposition to the single currency, he hoped to abandon them post-election. Such a maneuver would echo his moves following the 2013 election, where after standing together with these same forces he abandoned them in favor of a grand coalition with the PD.

The Democratic Deficit

Berlusconi’s attempt to temper his partners’ campaigning on the euro question, after spending some years casting doubt on the currency’s viability himself, has succeeded in pushing the issue to the margins of the campaign. The veteran performer has, in this sense, succeeded in pulling off a classic disappearing act: the starter pistol is fired, the smoke goes up, and the elephant is spirited away behind the magician’s curtain. Yet once the applause dies down, you can still hear the tired old beast wheezing at the back of the stage. And for all the tricks Berlusconi can deploy to defuse the euro issue, the unmistakable whiff of elephant dung still hangs in the air.

While the deficit limit typifies the economic straitjacket that the Eurozone imposes on member states, the debate on this issue only scratches the surface of the constraints the Eurozone imposes. The decisive question is not these tiny variations in spending, but the fact that membership of the single currency forbids Italy from having an independent monetary policy. While the constant depreciation of the lira outside periods of fixed exchanges was no golden age (the lira was, above all, unstable), governments in Rome did at least have the possibility of mounting adjustments, inflating away lira debts, and, most importantly, using devaluations to keep Italian exports competitive.

This poses problems that go far beyond the specific rules of the euro or still less the conversion rates of 2002. The single currency is a machine that has benefitted German export industries and state finances at the expense of the continent’s periphery. By providing an artificially low exchange rate (compared to the Deutsche Mark) it has allowed German companies to sink their rivals in countries like Italy beneath a wave of cheap exports. And, having drowned its industries, German finance is then free to provide a lifeboat: recycling Germany’s record surpluses as cheap credit to both the state and consumers. In turn, Italy is forced to issue its debts in what is effectively a foreign currency. The social consequences of this dynamic are disastrous.

The economically destructive impact of the Eurozone has not been displayed as dramatically in Italy as in Greece; there is stagnation and a slow exodus of young Italians, rather than a dramatic collapse. Yet in the long run, the effect of this currency system is corrosive not just to Italy’s growth prospects, but to democratic politics itself. The locking-in of a failed economic credo can only be accompanied by popular resentment. And any serious proposal to turn Italy’s economy around will have to confront it.

If in the run-up to March 4 the Lega and M5S have retreated from their anti-euro positions, this does not correspond to any rise in public support for the euro. Indeed, it is hard to see why it should cope with the next crisis any better than the last. Italy’s economic woes date back far before 2002; a return to the lira offers, at most, the opportunity to reduce crippling debt repayments and relaunch public investment. But to accept the Eurozone, as currently constituted, is effectively to admit that Italy must remain stuck in its current vicious circle, with massive emigration the only pressure valve for unbroken stagnation.

In this sense, the battle over the euro in Italy is not simply a fight between national sovereignty and the European project or the utopian ideas of the past against the dystopian reality of the present. It concentrates the whole problem of the neoliberal credo, the sense — or rather, the powers-that-be’s insistence — that “there is no alternative.” The heated exchanges between the main parties, allied with their increasing convergence on defining economic and political issues, express a context in which a clash of identities replaces hopes of meaningful change. In this election we are likely to see centrist parties weakened yet further, but also a fall in voter turnout to perhaps 60 percent, in a country which long boasted over 90 percent participation.

Despite 36 percent youth unemployment and a mounting loss of faith in politics, Italy is not best seen as a dilapidated old power failing to follow the march of progress. In fact, with the collapse of the old class-based parties at the turn of the 1990s, its political system is a child of our present moment; its fragmentation well reflects the prevalent sense of atomization. The rhetoric is fierce, the identitarian attachment is heartfelt, and the lack of choice is manifest. But as the historic parties of the French center collapse and Germany enters a new and weaker grand coalition, Italy does not look like such an outlier. Events in Rome are no aberration, but the concentration of a very European crisis.