Opinion: could an essentially rudderless Italy be a picture of Northern Ireland's future in economic and political terms?

This week saw a new Italian government confirmed by parliament. But for three months, the country effectively had no government. Could an essentially rudderless Italy be a picture of Northern Ireland’s future in economic and political terms?

There are, of course, more than a few differences between Italy and Northern Ireland: size, Eurozone membership, a higher living standard in most of Italy and the Renaissance. But Italy’s dysfunctional politics is imposing an economic cost, and Northern Ireland should learn from that.

Outside observers are often bewildered by the rise of the populist Five Star Movement and the anti-migrant League. Italy is the Eurozone’s third-largest economy and some senior EU figures such as European Commission President Jean-Claude Junker admit that Italian difficulties have the potential to disrupt the entire union.

Italy illustrates how far an economy can be held back when political institutions fail to deliver fundamental reform

By becoming a part of the single currency zone at the start of this century, Italy in fact surrendered the ability to use devaluation as a policy tool to help maintain national economic competitiveness. It could be argued that Italy has been stuck in a currency straitjacket ever since.

Sometimes history does repeat itself: the late 19th century saw the ill-fated Latin Monetary Union (LMU), which united the currencies of Italy and France and other Mediterranean countries, collapse.

The potential knock-on effects from such crises are one aspect of why the political and economic problems in Italy really matter to us here in Ireland. Another is the light Italy may shed on a matter closer to home – the relationship between political deadlock and economic performance.

Northern Ireland has had no government since January 2017

The Italian story is a case of both good news and bad news. International examples, such as Italy in the 1950s and 60s and the US more recently in terms of budget squabbles between President and Congress, suggest that the business sector can prosper and grow for a while in spite of a lot of political dysfunction or instability. 

That’s the good news. The bad news is that Italy over the last two decades or so illustrates how far an economy can be held back when political institutions fail to deliver fundamental reform. 

Of course, many of Italy’s troubles are internal in origin but membership of the Eurozone does act as a constraint that limits options.

The longer politics fails to work in Northern Ireland  the greater the likelihood we are heading for an Italian stagnation

It may also have reinforced a tendency to believe that somehow the European Union can be relied on to save the country from its economic woes (the parallel in the Northern Ireland case is the belief that the backstop solution is extra cash from London). 

Alongside this, the Italian political establishment has displayed a touching faith in technocrats: the belief that if academic economists without any electoral mandate are appointed to ministerial positions then all will be well! 

The Italian populists cannot deliver the necessary fundamental reforms because they often have the wrong ideas. The Italian technocrats have not really delivered either because they lack a mandate or legitimacy.

Listen: Ahead of the new Italian Prime Minister Giuseppe Conte being sworn in, This Week spoke to journalist Paddy Agnew on what is next for the country.

Italy may have had little or no government for three months. Here in Northern Ireland we have been in that position since the end of January 2017.

The longer politics fails to work in Northern Ireland – our own politicians are closer to the Italian populists than the technocrats – the greater the likelihood we are heading for an Italian stagnation.

A survey in 2013 by Cambridge Econometrics/SQW indicated that in terms of trust in politicians and transparency of decision making, Northern Ireland ranked worse than both the UK average and the Republic of Ireland (though, interestingly, Italy was indicated to be worse).

So, there is the pessimistic possibility that Northern Ireland could become more like Italy since 2000 – a country where political decision making seems to be in paralysis, fundamental reform has been postponed so often that all the problems have been allowed to accumulate and where economic growth has slowed towards zero.


The views expressed here are those of the author and do not represent or reflect the views of RTÉ