The financial crisis has thrown Europe’s weaknesses and belated response to the contagion into the spotlight. The options for Europe are easy to state, but much more complex to put into practice: greater integration, subsidiarity instead of single state egocentricity, and an economic recovery guided by a leader with vision that is not tied down by their own national self-interests. Italy in particular has been revealed as being without a coherent industrial policy or an adequate government, hampered by its provincial mentality and manufacturing system still unbalanced in favor of sectors that are already mature.
Without the economic maneuvering of the Monti government, Italy would have risked default. The situation was dire, and a default would have been an extreme measure, but a marked decline in the overall situation was inevitable. Italy cannot expect to emerge from the crisis by using methods of the past. Competitive inflation, printing more currency, and increased debt are not the solution. Italy will have to find a way to deliver incentives for a recovery while sticking to the rules of austerity. This combination could be possible, but the real problem is that too much time has passed without making meaningful reforms, and now it may be too late.
Italy needs resources to invest in the country to stimulate prosperity and new jobs. To attract the necessary foreign investment (and opportunities in Italy do exist), Italy will have to get the country under control, cut down on the bureaucracy, and reduce corruption. These are administrative measure, not the concession of economic advantages. There is great international attention on what will happen after Monti leaves office; he is able to guarantee respect on the international playing field, and stability at home.
To make Italy competitive once again in the international arena, it must make an effort to invest in education, free itself from interest groups and lobbies, reward merit, and restore the rule of law. Italy’s small and medium enterprises, a backbone of the country, need to understand that remaining small puts them at risk, and can be painful at times. In a globalized economy, the risks of being swallowed up by bigger and stronger companies is a given. For this reason, Italy’s SME’s need to either preempt the competition, or unite with larger corporations that can give them strength and stability.