Italy’s recent political crisis has at once confirmed the European Union’s unsustainability and the left’s impotence.
That the euro is a currency system within which a country like Italy cannot breathe has been obvious for at least a decade. Equally predictable was that the ensuing asphyxiation would lead to a political implosion – such as the one unfolding in slow motion since the Italian general election in March. What was not inevitable was the left’s spectacular failure to benefit from the kind of crisis it ought to have been well positioned
to predict.
The 2008 financial crisis was our generation’s 1929. We have been angst-ridden ever since by the prospect of the left failing to resist the organised misanthropy that such historic moments spawn.
Our worst fears could not have been more emphatically confirmed than by the political transformation in Italy. An anti-systemic majority of Italian voters ignored the left and installed a right-wing government (comprised of the Five Star Movement and the Lega) with a mandate to slash taxes for the rich and cage 500,000 migrants prior to expelling them to goodness knows where.
Debt and capital accumulation are capitalism’s twin engines. When one falters the other suffers, a periodic crisis that is as certain as death or taxes. What is special about Italy is that its capitalism does not resemble that of any other European country. The only advanced country that it comes close to is Japan.
Like Japan, Italy has a dynamic, export-orientated manufacturing sector, a rapidly ageing population and unusually low private debt. Since debt is to capitalism what hell is to Christianity (unpleasant but essential), large public debt makes up the shortfall in both Japan and Italy. The crucial difference between the two countries is that Italy is part of the EU and, more importantly, the eurozone.
When a debt crisis, which is inevitable in every capitalist country, occurred in Japan, its banks became insolvent and continued for years to resemble zombies: undead institutions incapable of borrowing to lend to business. This is comparable to the impact on Italian banks after 2008. But whereas the treasury and the central bank of Japan acted as lenders of last resort, Italy was stranded in a eurozone in which its central bank and treasury were prohibited from intervention. That is why Italy’s crisis was so much worse than Japan’s, and why its political centre now lies in ruins.
Like almost all of its counterparts in Europe, the Italian left is split between two groups: Euroloyalists (pro-EU) and Euroclasts (anti-EU). Having falsely identified the EU project with internationalism, leftist Euroloyalists were soon co-opted by the European establishment, whose true aim was the removal of all political decisions from the democratic sphere and their transfer to the democracy-free, “technocratic” realm of Brussels and Frankfurt, where the interests of Europe’s industrial/banking cartel have been served so well for so long. While that cartel was riding high, a wave of large capital inflows into Italy kept its oligarchy in control with the aid of leftist Euroloyalists sharing government with the centre right.
Once the crisis hit, the leftist Euroloyalists who participated in governing Italy performed perhaps the greatest act of self-harm in political history by agreeing to new EU rules that made it impossible for Italy’s economy to survive within the euro, namely: (a) rules for winding down failed banks that destroyed the savings of ordinary Italian families; (b) a Fiscal Compact that forces Italian governments to cut spending during periods of free-falling investment and consumption; and, remarkably, (c) the rule that Italy’s contribution to the bailouts of Greece, Ireland and Spain should be paid for with further spending cuts to… Italy’s social budget.
Did the leftist Euroclasts benefit once the median Italian voter began to choke? No. During the economic downturn they remained as marginalised as they had been during the upturn. Italian society turned instead to the racist right, which combined the Euroclasts’ anti-EU rhetoric with a xenophobic project. As in the 1930s, once the promise of cosmopolitanism delivered financial deflation and economic stagnation for the majority, those politicians turning an accusatory finger at the “other” and the “alien” did splendidly.
Over the past two years, along with comrades in the Democracy in Europe Movement 2025 and others, I have been involved in efforts to create a unified progressive movement across Europe. Our greatest enemy has been the toxic division between Euroclasts and Euroloyalists. Holding the centre is a difficult role to play. But I am convinced that this middle ground is the one on which a revived left must now build.
Leftist Euroloyalists must be made to understand that the present EU is, undoubtedly, a regressive, unreformable construction. Equally, leftist Euroclasts need to grasp that the racist right will easily trump their pledge to dissolve the EU by adding racism and copious doses of nationalism to the mix.
The left should abandon calls for “reforming” the EU. Equally, we should stop calling for the EU’s “disintegration”. Instead, the left must adopt a credible pan-European policy agenda that explains to Europeans how the EU, and the euro, could be run differently, democratically, sustainably and on behalf of the many. Since the oligarchy running the EU will never consent to any such policy agenda, we must vow to take over EU institutions to implement it. In addition, we must outline our plans for absorbing the fallout from this conflict, including the possible disintegration of the euro and even the EU itself.
Finally, we must confront the racists head-on with a pro-migration campaign defined by the slogan: “Let them in.” The simple truth is that the only way to confront xenophobia is through radical philoxenia.
Yanis Varoufakis is a founder of the Democracy in Europe Movement 2025 and a former Greek finance minister
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