Europe’s debt crisis topples two governments

What happened

Italian Prime Minister Silvio Berlusconi and Greek Prime Minister George Papandreou were forced to announce their resignations this week, as European leaders struggled to contain the eurozone’s accelerating debt crisis. The focus of concern has shifted from Greece to far larger Italy, the European Union’s second-most-indebted country, where an embattled Berlusconi finally pledged to step down after failing to secure a parliamentary majority on a key budget vote. But the prospect of his departure failed to calm market fears that Italy will soon be unable to pay its debts. Government bond rates soared past 7 percent, the level at which Greece, Ireland, and Portugal requested bailouts. With $2.6 trillion in total government debt, Italy is seen as simply too big for the EU to bail out. Berlusconi cast his exit, which he said would come as soon as austerity measures are passed, as a way to restore markets’ faith in his country, but it hasn’t done so yet. “We have to show markets that we’re serious,” Berlusconi said.

Greek leader Papandreou stepped down following a dramatic week in Athens in which he retracted his pledge to hold a referendum on the Greek bailout. Though he survived a confidence vote in Parliament, members of his own party subsequently abandoned him. Amid bitter interparty squabbling, members of Parliament were still negotiating to name a new leader and form an interim Greek government, which would rule until elections in February.

Subscribe to The Week

Escape your echo chamber. Get the facts behind the news, plus analysis from multiple perspectives.

SUBSCRIBE & SAVE

Sign up for The Week's Free Newsletters

From our morning news briefing to a weekly Good News Newsletter, get the best of The Week delivered directly to your inbox.

From our morning news briefing to a weekly Good News Newsletter, get the best of The Week delivered directly to your inbox.

Sign up

What the editorials said

Good riddance, Silvio, said Bloomberg.com. Berlusconi’s “dazzling unfitness for office” has been made plain by charges that he mingled his government and business interests and hired prostitutes for wild parties. His “serial scandals, prosecutions, [and] diplomatic pratfalls” have helped push Italy to the point of financial breakdown. A default by the Italian government would be the “heaviest blow yet to strike the world economy,” but competent leadership can still save the country from that fate.

Don’t be so sure, said the London Telegraph. “An end to bunga bunga may give Italy back a little of her pride, but it solves nothing.” Berlusconi’s successor is unlikely to deliver economic reforms or enliven an Italian economy that has been stagnant for over a decade. “The bottom line is that Italy is in the wrong currency,” condemned to economic woes so long as it holds onto the euro.

Is Washington watching? said the Chicago Tribune. “As goes Europe, so goes America.” The U.S. economy will continue to suffer as long as this debt mess persists. But as the crisis “decapitates national governments” in European capitals, it also offers U.S. politicians “an uncomfortable preview of what could be in store” for them if they fail to rein in our own national debt. Washington should consider Europe’s troubles a warning.

What the columnists said

Even in Italy, it’s the economy, stupid, said Stephan Faris in Time​.com. There’s a “certain poetry” to Berlusconi’s being brought down not by his many sex and corruption scandals but by the country’s finances. For years, his gaffes and failure to deliver reforms were “merely occasions for amusement.” Now, they’re actual liabilities.

But the pressure on Berlusconi to resign didn’t come “from Italian voters fed up with his idiocies,” said Harold Meyerson in The Washington Post. It came “from the bond markets, which are making it impossible for Italy to finance its debt.” Berlusconi was an “autocratic narcissist” and no “poster boy for democracy.” But at the end of the day, this is a case of the markets triumphing over Italy’s sovereignty.

National sovereignty is yet another victim in a misguided quest to save the euro at all costs, said Gideon Rachman in the Financial Times. The common currency was designed to promote economic prosperity and political harmony, but clearly “it is doing the precise opposite.” So perhaps it’s time to get real about ditching it. Beyond Greece and Italy, Spain, Ireland, and Portugal are all still teetering on the edge, and could tumble over with the next inevitable crisis. Breaking with the euro will be painful and difficult. But “Europe’s leaders need to start planning for it.”