The Italian election, in which anti-austerity parties won more than half the vote, should convince European authorities to reassess the restrictive economic policies that could threaten the future of the euro, said Goldman Sachs Asset Management Chairman Jim O’Neill said.
Italians are saying, “We’ve had enough of just pursing austerity; we want reform of the political system and something to give us some growth,” O’Neill said in an interview from Cernobbio, Italy. “For the third-largest economy in the eurozone and one of the core, principal European countries to say something like that, I think it’s an important thing.”
The popular backlash against austerity that is also sweeping Greece, Portugal and Spain is threatening to upend the political system in Italy after the Five-Star Movement of comedian-turned-politician Beppe Grillo won a quarter of the vote and a blocking minority in parliament. Grillo, who may play a role in forming the next government, has called for a referendum on Italy’s euro membership and debt repayment.
Also speaking on Bloomberg Television, Nouriel Roubini said the Italian election results threaten to reignite the region’s debt crisis and could undermine the European Central Bank’s pledge to backstop the bonds of countries sticking to budget rigor.
“The Italian elections are a game changer because until now the bargain was Italy and the periphery do austerity and reforms and then the ECB and Germans are going to be patient and provide liquidity,” Roubini said. “That political bargain is now unraveling so I see stormy weather ahead in the eurozone.”
Speaking in a Bloomberg Television interview with Mark Barton, O’Neill said European policy makers need to acknowledge the shift in sentiment and that the austerity policies may not be the only model.
“What Europe needs is a whole different approach and stronger leadership and bolder thinking on how to evolve,” he said. “Otherwise Europe is going to have persistent problems and become less and less important and the whole rationale for the euro will cease to exist if they carry on like this for another decade.”
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