Italy vote is 'blunt message' to Brussels against austerity

Italian voters handed Brussels a "blunt message" against its austerity policies, analysts and politicians said Tuesday, but the EU executive said there was no other way out of Europe's economic woes.

Just as the eurozone debt crisis seemed to be melting away, the threat of political instability in Italy due to an election stalemate in the European Union's fourth largest economy revived fears of fresh financial turmoil in the months ahead.

Leaders across Europe called for the quick formation of a "stable" government and former Belgian premier Guy Verhofstadt, leader of Europe's centrist parties, said stability was key "if we want to avoid a return to the worst of the eurozone crisis."

"It is a very difficult result for the EU as a whole," said Martin Schulz, the German Social-Democrat president of the European Parliament, delivering the first official response in Brussels to the vote. "What happens in Italy affects us all."

Schulz said the Italian vote was "a clear expression of dissatisfaction", a message that "people are ready to make sacrifices but not at any cost."

Bernadette Segol, leader of the European Trade Union Confederation (ETUC), said the gains made by parties that campaigned against the EU's austerity formula -- around 57 percent -- was a new "signal of alarm".

"Many people don't understand that Europe can find money to save the banks but not to relaunch growth," she told AFP.

The polls saw a massive vote for a new populist anti-austerity party which came a close third to centre-left Democratic Party leader Pier Luigi Bersani and former premier Silvio Berlusconi on the right.

The big loser was outgoing prime minister Mario Monti, who was drafted in to run a technocratic government in the debt-strapped country after Berlusconi was ousted at the height of the financial crisis in 2011.

Monti's failure to secure more than one out of 10 votes despite backing from across Europe showed the rising levels of dissatisfaction with Europe's belt-tightening drive, said Jan Techau, head of the Carnegie Europe think tank.

"Europe-critical politicians won votes," he said.

Techau said Italy had seen the biggest gains in recent years in Europe for a populist party -- the anti-establishment Five Star Movement, driven by deep and long-lasting exasperation with a corrupt political class.

"Italy is the first country that has gone for that message," he said.

"So far European democracy has been resilient. The bigger risk is countries like Spain and Portugal that (are in) ... recession and stay in recession for a long time."

The EU executive admitted that "we clearly hear the message of concern expressed by Italian citizens", facing 11.6 percent unemployment this year -- almost 40 percent for under-25s -- after 10.6 percent last year.

But Italy had to stick to its pledges of budget cuts and economic reforms, said the European Commission.

"Italy has made commitments vis a vis the Commission and other member states, on the reduction of its deficit, on the reduction of its debt, and on a number of other pledges of structural reform," said commission spokesman Olivier Bailly.

Putting the changes off now, would only mean more pain and greater austerity later, he said, adding: "What if we had not done anything … what would be the size of the bill ... in five year's time?"

The Italian economy has been in the doldrums for several years and is expected to shrink 1.0 percent this year after 2.2 percent in 2012, according to the latest EU forecasts.

Its accumulated debt is forecast at 128.1 percent of GDP this year, more than double the EU limit of 60 percent.

Pascal Delwit of the European Studies Institute said that Italy's vote against austerity would likely trigger fresh efforts to rethink current policy.

"This message is primarily addressed at Germany, which orients policy in the eurozone," he said. But with Chancellor Angela Merkl facing elections in the autumn, there may be little to no change till then, he said.

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http://www.globalpost.com/dispatch/news/afp/130226/italy-vote-blunt-message-brussels-against-austerity