It is easy to see Silvio Berlusconi as an egocentric and aging clown figure desperate to stay relevant—
especially when looking at it from outside Italy. But this would be a mistake. He is no Donald Trump. His message is real and should be heeded, both in Rome and Berlin, even if his odds of winning are nil.
Let me be clear: It would be a disaster if Berlusconi were to return to power. Even if you support that part of Italy’s political spectrum, you should recognize that Berlusconi is too polarizing a figure inside of Italy, and too compromised a figure outside of it to manage the country effectively in what will surely be a progressively more difficult economic and political landscape.
The reality is that economic contraction is weighing on the Italian people. And when people are in pain, they tend to look for someone to blame. It is in our nature. Witness Greece
Berlusconi is tapping into this. Increasingly, Italians will blame austerity and Germany for the persistent and deepening economic contraction that the process of internal devaluation is visiting upon them. In fact, as I started to write this, the FT came out with a survey providing evidence that this is more than just conjecture
. Say what you will about ‘Berlusca,’ but he has always been the consummate salesman, one with a keen sense of the issues that resonate with the Italian people. Once again, he seems to be one step ahead of the curve.
And it doesn’t matter how much Germany is actually to blame. Nor does it matter if less austerity—within the context of Italy’s real financing constraints—will meaningfully change Italy’s growth path (I don’t think it would). What matters is that this perception in Italian eyes is real and this sentiment will only grow, especially when stoked by the months of campaign rhetoric that now lie ahead. The forces unleashed are centrifugal. Moreover, Italy is not the only eurozone country in the pressure cooker.
Fair or unfair, if Germany wants to keep the single currency together, it must hear the Italian message that Berlusconi is tapping into and find ways to accommodate it. Big decisions await. And this is going to be one for the ages (and, actually, the aged).
This article originally appeared on Behavioral Macro.
No positions in stocks mentioned.