Mario Monti has done Europe’s voters a huge service. It would have been easy for him to remain aloof during this election; by standing for election he allowed Italians to directly express their opinion on the EU’s current macroeconomic policy mix. The results are pretty conclusive: current policies have no democratic legitimacy, at least in Italy.
We all remember Jean-Claude Juncker’s statement that “We all know what to do, but we don’t know how to get re-elected once we have done it”. He got it half right: they certainly don’t know how to get re-elected. But it is also clear that they really don’t know what to do about the economy either. And this represents a huge problem for the European project, since by pinning their colours so firmly to the mast of an incoherent and destructive macroeconomic policy mix, Europe’s leaders risk doing huge damage to that project. Indeed, the damage is already occurring.
It would be nice to think that these leaders would take seriously pleas by people like Karl for a saner approach to macroeconomic policy. The evidence since September, however, is that they will sit on their hands unless forced to do otherwise by the markets: the risk of financial crisis, not the reality of peripheral unemployment crises, is what grabs their attention. Another reason to welcome the Italian vote, perhaps.
Update: Paul Krugman has a very similar reaction here.