Bloomberg News

Euro Exit Can’t Be Taboo in Indebted Italy, Grillo Says

May 10, 2012

Euro Exit for Italy "Not Taboo," Grillo Says

Comedian-turned-politician Beppe Grillo's 5 Star Movement may emerge as Italy’s third-biggest political force in local elections. Photographer: Andreas Solaro/AFP/Getty Images

Italians should consider exiting the euro amid rising public debt and no signs of economic recovery, said Beppe Grillo, a comedian-turned-politician opposed to Prime Minister Mario Monti’s austerity measures.

“Let’s face the issue, it can’t be a taboo,” Grillo, 63, said in an interview yesterday after his Internet-based political movement emerged as the third-biggest party in local elections this week. “As debt rises, spending isn’t under control, businesses close down, labor cost is up, salaries are down and we don’t even have the power of bargaining our debt.”

His 5 Star Movement, founded in October 2009, is the latest grouping to profit from rising anger in Europe over tax increases, budget cuts and joblessness amid the sovereign debt crisis. The National Front, which seeks a euro exit, won record support in the first-round of French voting last month, while the second-place party in Greek polls this week wants to tear up the nation’s European Union-led bailout agreement.

Italy’s economy, which has trailed euro-area growth for more than a decade, is in its fourth recession since the single currency was introduced and will contract 1.2 percent this year, according to the government, which is implementing 20 billion euros ($25.9 billion) in austerity measures. Costs of servicing a debt of 1.9 trillion euros will climb to 5.3 percent of gross domestic product this year from 4.9 percent in 2011, government estimates show.

‘Ever-Tightening Noose’

The euro “is an ever-tightening noose, and there’s not even the comfort of making sacrifices to see some kind of recovery -- there’s no sign of economic recovery at all,” Grillo said in a phone interview from his home in Genoa. “This isn’t just an Italian phenomenon; think of the almost 20 percent gained by Marine Le Pen in France, or the success of both far-left and far-right parties in Greece.”

Political deadlock in Greece and Spain’s fiscal woes have helped reignite the debt crisis, as the impact of the European Central Bank’s injection of 1 trillion euros into the banking system fades. The premium investors demand to hold Italian 10-year bonds instead of German equivalents was 396 basis points at 4:14 p.m. Rome time, compared with 278 basis points March 19.

Grillo’s movement surged in May 6-7 local elections as Italians punished former Prime Minister Silvio Berlusconi’s party and his ex-coalition ally, the Northern League. Grillo’s mayoral candidates came in second with 19.5 percent of the vote in Parma and third with 13.9 percent in Genoa. The grouping won its first ever mayoral seat in Sarego, a town of 6,600 people in the northern Veneto region, and its candidates face runoffs in three other northern municipalities on May 21-22.

No ‘Boom’

While daily la Repubblica spoke of the party’s performance as a “boom,” President Giorgio Napolitano played it down. “The only boom I remember is the economic one of the 1960s,” Napolitano, 86, said on May 8. “I don’t see any others.”

Monti, asked on the same day whether Grillo’s electoral success would have any impact on the government, said it “wouldn’t have any consequences” on his policy agenda.

During the election campaign, Grillo said he favored Italy staying in the EU while restructuring public debt and exiting the euro “with the least possible damage.” In yesterday’s interview, he said his comments on the euro were “personal” and that his movement will debate the issue and then take an official position.

Assessing Damage

“We should ask ourselves if we can do it and what the damage would be,” he said about staying in the single currency rather than returning to the lira. “We would be able to depreciate our dear old lira by 40 percent to 50 percent overnight and that, while not solving our economic problems, would make more competitive” Italian exports.

He also reiterated a call for Italy to consider defaulting or paying only part of its debt. Italy’s debt load is the euro region’s second-biggest after Greece, set to reach 123.4 percent of gross domestic product this year.

“Sovereign states can decide not to pay it back,” Grillo said. “Just as an investor in a company that defaults has run a risk, for example, those in France who bought billions of euros in Italian bonds have run a risk.”

Francesco Boccia, a lawmaker from the Democratic Party that backs Monti, said Grillo’s remarks on the lira constituted his first “precise political proposals,” according to an e-mailed statement today. “It would be really hard to find a better way to massacre our worst-off citizens and plunge Italy into a situation worse than any it’s ever seen in history.”

Parmalat Jokes

Grillo’s political career dates to jokes he made during his stand-up routines about accounting flaws at Parmalat Finanziaria SpA in 2002, a year before the dairy company filed for Europe’s largest bankruptcy. He then started a blog one sleepless night in January 2005, whose readers became the first members of his 5 Start Movement.

The grouping won’t seek an alliance at general elections next year or in Parliament, should its candidates get elected, Grillo said. Grillo himself is ineligible for elected office due to a manslaughter conviction after a car accident in the 1990s.

He said as traditional parties increasingly lose support and seek alliances, they’re “desperately trying to liquefy themselves to create a new entity, the diarrhea party.”

“Grillo deserves credit for putting the issue of Italy’s euro membership on the political agenda,” said Loretta Napoleoni, a lecturer at Cambridge University’s Judge Business School in the U.K. Still, “Grillo’s call is insufficient by itself, and all politicians need to start working on what the country and its economy will need after Italy exits the euro.”

Social Upheaval

Grillo blamed Monti for failing to pursue budget cuts that “90 percent of Italians” would back, such as reducing the cost of politics and targeting “tax evasion by gambling companies.” He said authorities should be grateful to him for giving a peaceful voice to growing anger over Monti’s austerity drive.

Italy risks an economic and social upheaval over rising unemployment, Development Minister Corrado Passera said at a conference in Rome today. Official data don’t fully reflect Italy’s “widespread” social problems with joblessness at an almost 12-year high of 9.8 percent, Passera said.

“In Italy, there are no neo-Nazi parties like in France or Greece,” Grillo said. “Our movement can channel violent sentiments across the society into a party that is legal and peaceful, made up of beautiful people and ideas,” he said.

To contact the reporters on this story: Lorenzo Totaro in Rome at ltotaro@bloomberg.net; Chiara Vasarri in Rome at cvasarri@bloomberg.net; Andrew Davis in Rome at abdavis@bloomberg.net

To contact the editors responsible for this story: Craig Stirling at cstirling1@bloomberg.net; Jerrold Colten at jcolten@bloomberg.net


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