Europe and Italy: Expansionary Austerity and Expansionary Precariousness

Needless to say, policies in Italy are far from those here envisaged, although the public role in the deployment of the described interventions would be crucial. In fact, the measures taken to pursue fiscal consolidation have so far prevented the adoption of proper growth- enhancing policies. In the absence of these policies aimed at expanding the aggregate demand through an increase in public expenditure the three complementary policies described above are not likely to succeed. In fact, they could have an opposite effect with respect to the desired one. We could witness reduced employment instead of its expansion; firms could take advantage of the second- level bargaining against an even weaker counterpart (the unions): higher flexibility and wage squeezing could be the bargaining output, with a further depressing effect on consumption and then on aggregated demand. The public role cannot be neglected, then, but it is fundamental. However, at the national level we are forced to act within binding rules agreed upon at the EU level. It is at the European level that we need a major change. As Paul De Grauwe (2014) recently stated in “Stop Structural Reforms and Start Public Investment in Europe,”Thus the coordination of policies at the EU level becomes as important as public intervention at a national level. We should move in a context in which the Fiscal Compact should not be taken for granted, because we strongly believe major revisions are needed, and we here stress the importance of coordinated labor market policies among Eurozone countries: the Eurozone countries should agree in following the “golden rule for wages,” and they should also agree to developing coordinated labor market policies and institutions that are as homogeneous as possible.