The news coming out of last month’s elections for the European Parliament was deeply unsettling. Yes, voters delivered a well-deserved slapdown to the bureaucrats in Brussels. But they vented their dissatisfaction with the status quo by backing a motley array of nationalist, xenophobic, and outright fascist parties.
Often incorrectly lumped together as “right wing,” these parties are anything but pro-market, preferring a search for scapegoats — foreigners, immigrants, gays, Jews, Muslims, whoever — over reforms to the sclerotic European welfare state. For example, Marine Le Pen, leader of France’s National Front, believes there “are certain domains which are so vital to the well-being of citizens that they must at all costs be kept out of the private sector and the law of supply and demand” and supports government control of health care, education, transportation, and energy. In Denmark, the Danish People’s Party supports nationalized health care financed by taxation. In Hungary, the rabidly anti-Semitic Jobbik calls for the renationalization of strategically important companies. Greece’s neo-Nazi New Dawn opposes recent cuts in government spending and pensions.
For many of these parties, their economic policies, which as mentioned above are often almost an afterthought compared with nationalist and anti-immigration sentiments, have very little regard for free markets, and are instead an amalgamation of welfarist, protectionist, and statist ideas.
One interesting and surprising potential bright spot, however, was in Italy, where the Democratic party of Prime Minister Matteo Renzi won nearly 41 percent of the vote, the largest percentage of any party across the entirety of Europe. What’s particularly noteworthy about this showing is that it comes despite the fact that Renzi has shown himself willing to challenge the country’s welfare state in ways that are virtually unprecedented for modern Italian politics.
Italy has long been one of the economic basket cases of Europe. Its debt, including future unfunded pension liabilities, well exceeds 365 percent of its GDP. Total government revenue approaches 48 percent of GDP, coupled with widespread tax evasion, while spending tops 50 percent. Rigid labor laws have led to an unemployment rate of 12.6 percent. Youth unemployment is almost 42 percent. And the country lost more than 1,000 jobs per day over the past year. The economy has shrunk by almost 3 percent since 2012.
In February, Renzi, who was then mayor of Florence, staged a political coup, seizing control of the center-left Democrats and becoming Italy’s 62nd post-war prime minister. Since then, he has shown a willingness to take on many of the Italian government’s most sacred cows.
Renzi has cut more than €2.1 billion in spending from this year’s budget, including through a cap on government salaries. And he has announced even larger cuts for next year, as much as €14 billion, a bit less than 2 percent of total spending. While just a drop in the bucket, this still represents the biggest reduction in government spending since 1995.