A Trumpian trade war, a new German government, and an Italian election mess

A new government is finally ready to take office in Germany, just in time for a threatened trade war from Washington and political chaos in Europe's fourth largest economy.

A week of turmoil for Europe

Yesterday was a big news day for EU politics, with a series of high-profile speeches in reaction to the disastrous election result in Italy on Monday. But despite the many speeches, the message has been singular: there is “no alternative” to austerity, and hostility toward the EU in domestic politics is exascerbating the euro crisis.

The day started with a speech by humiliated ‘technocrat’ prime minister Mario Monti at the European Commission. Having been rejected by his home country, it is perhaps unsurprising that the former European Commissioner wanted to come to Brussels, where people understand him. It was Brussels after all, at the behest of Berlin, who installed Monti on the Italian throne after forcing out Silvio Berlusconi at the height of the Italian crisis in 2011.

And it is no coincidence that it was the ‘Italians abroad inEurope’ voting region in which Monti received his highest share of the vote – 30%. This compares to the 9% of the vote he received at home – less than half the vote chare received by anti-establishment comedian Beppe Grillo.

Send in the clowns

There are plenty of people in Europe who hold stereotype-based views about Italy - that it is and has always been an ‘unserious’ country. Italian voters won’t have helped that perception over the weekend, when half of them voted for either a comedian or a clown to lead their country. “Do they think this is a joke?” one exasperated German asked me this morning.

Elections have consequences, and people get the leaders they deserve. Those Italians who insist on re-electing the clownish SilvioBerlusconi despite the ruin and shame he’s brought to Italy - and those Italians who decided they would rather see political anarchy by voting for a comedian who will not even sit in the parliament – will get the future they deserve. The problem is that because of the Eurozone debt crisis, we are all going to get the future they deserve.

Those outside Italy have long been baffled at how such a sizable portion of the Italian population could still support Berlusconi after the corruption allegations, Bunga Bunga parties, dalliances with underage Moroccan prostitutes and – most consequentially – the disastrous handling of the Italian economy. But what is newly shocking is the other surprise winner of this election – an anti-establishment comedian. The fact that so many Italians would vote for what is essentially an anarchist party, led by a comedian who does not even intend to take a seat in the Italian parliament, has rattled the world today.

The Italian election that could sink Europe

Italy’s constant lurching between left and right since WWII had, in the past, become so frequent that few people bothered to pay too much attention to the vagaries of Italian politics. But all that has changed since the advent of the eurozone crisis. All eyes are on the Eurozone's third largest economy this weekend as Italians go to the polls in what could be the most consequential Italian election of the modern republic.

Much of the international media attention has focused on the possibility of a return to power for the country’s notorious former leader Silvio Berlusconi, who was ousted in 2011 by what essentially amounted to an EU putsch. The prospect of a return to power for the now clearly mentally unstable Berlusconi is terrifying to the rest of Europe and would likely result in absolute panic in the Eurozone. But such a scenario is unlikely, even with Berlusconi’s last-minute efforts to try to buy votes by promising tax rebates.

Are Europe's conservatives now dependent on the far right?

Yesterday’s news that the government of Dutch Prime Minister Mark Rutte had collapsed sent almost immediate shock waves through the world’s financial markets.

Investors, who were already feeling skittish about the first-round victory of French Socialist presidential candidate Francois Hollande on Sunday, found themselves with something much more serious to worry about. The government of the Netherlands, one of the core austerity-pushing states of the Eurozone, couldn’t even pass the tough medicine they helped design for Europe.

Holland and the three other euro-using countries that still have triple A ratings (Germany, Finland and Austria) have pushed for every eurozone country to make massive cuts by the end of the month. But yesterday Rutte was forced to tender his resignation after it became clear he could not get his own parliament to approve the tough medicine he had helped design for all of Europe.

But perhaps more interesting from a political perspective is who it was that precipitated this crisis – the infamous far right leader GeertWilders. Rutte was only able to form his governing coalition in 2010 by relying on the backing of Wilders and his far right Party of Freedom group, which had polled at 15.5% in that year's election. Wilders has been tried in the Netherlands for hate speech against Muslims, and has been banned from entering the UK in the past.

Is Iowa the problem, or is it the primary system?

While I was home in the US over the past few weeks I witnessed the quadrennial spectacle of the Iowa caucuses - shivering reporters in front of the capital dome in Des Moines, candidates eating corn on the cob while clutching plump cord-fed babies, the usual fare. And I was also able to witness the quadrennial griping about why the United States allows “a few hundred farmers” to pick its president.

The complaining about the Iowa caucus, where the first nominating primary for both political parties’ presidential candidates is held, is both predictable and legitimate – even if the language used sometimes smacks of regional snobbery. The Iowa caucus makes or breaks politicians running for the presidency. Barack Obama owes his presidency to winning the Iowa Democratic caucus in 2008. This year, the result of the Republican caucus will force Michele Bachman and Rick Perry to drop out of the race. And the Iowans have elevated Rick Santorum from obscurity to be the main challenger to frontrunner Mitt Romney.

But the Iowa caucus is a big deal only because it is first. And being first means presidential candidates promise Iowa all sorts of lovely things (just look at the corn subsidies of the past four decades – and you wonder why Americans have corn syrup in most of their food for no reason?). The Iowans go through outrageous lengths to make sure they are first. When South Carolina and New Hampshire tried to move their primaries ahead of them this year, Iowa moved theirs to the earliest possible day in 2012 – 3 January.

This year the criticism went perhaps a little too far. A professor at the University of Iowa (himself a transplant from New Jersey) wrote a column for The Atlantic about a much-asked question – why should a state that is not ethnically or ideologically reflective of the country as a whole be given such a prominent role in selecting the nation’s president? But he asked it in a way that was incendiary to say the least, calling Iowa a place that's "culturally backward" and teeming with "slum towns”, where the 96% white population “clings to guns and religion.”

The new Italy: this is what technocracy looks like

Former EU commissioner Mario Monti, appointed as Italian prime minister on Sunday after Silvio Berlusconi was forced by the markets and EU leaders to resign, had his ‘technocrat government’ approved by the Italian parliament today.

Neither Monti nor the members of his cabinet have been elected by the Italian people. They are not politicians but instead experts in their respective fields. The 'government of experts' has been brought in because, it was thought, both within and outside Italy, the Italian political system is so broken that only unelected non-politicians could be trusted to implement the reforms EU leaders say are necessary to prevent the country’s economic collapse.

American readers may be wondering how on earth a national leader in a democracy could come into power without having been elected. It has to do with a quirk in parliamentary democracy. Members of the upper houses of many of Europe’s parliaments (their equivalents of the US Senate) are appointed rather than elected. A prime minister can come from either house, so if the parliament wishes to appoint a leader who has not been elected they simply have the president appoint that person to the senate.

Are we done with democracy?

It has been a dramatic week for Southern Europe, with the elected leaders of both Greece and Italy falling as a result of pressure from the markets. Both are to be replaced by unelected technocrat governments, with former EU economists being appointed to replace them. It would appear that the democratic political systems in both countries were incapable of delivering a solution to the debt crisis. The unprecedented situation has prompted uncomfortable questions. Given the North Atlantic crisis the West has found itself in and seems to be incapable of extracting itself from, is democracy failing?

This was the question being asked on the BBC's Newsnight programme Wednesday night. Italian economist Vito Tanzi said during the interview that a government of unelected technocrats can do what elected politicians cannot - tell people the truth and push through unpopular but necessary reforms. "It can do a better job of informing people what needs to be done. I think that is the problem that the Italians were told for many years that there were no problems, that nothing needed to be done when the situation was progressively getting worse. If you have this kind of government, then sooner or later you get in trouble. The technical people would know better and would tell people what the consequences are of continuing with current policies"

He was of course speaking of his friend Mario Monti, the former EU Competition Commissioner who is set to be appointed new Italian prime minister.

In Greece, it was announced yesterday that another EU official, former European Central Bank vice president Lucas Papademos, will be appointed prime minister of Greece. Neither of these men has ever been elected to any office in their home countries. But both were appointed by their countries to their EU positions, and both earned praise for their performance in those positions. Greece and Italy are joining the two EU countries which already have provisional unelected governments - Slovakia (whose government collapsed after the parliament refused to back the Greece bail-out) and Belgium.

Berlusconi is finished - for real this time

This blog has predicted the imminent resignation of Italian prime minister Silvio Berlusconi many times. In fact I counted, and in the past six years the blog claimed on five separate occasions that his sex and corruption scandals were about to topple him. After all it was hard to believe that a leader facing the kind of allegations he has faced could have held on to power. But this is Italy, and the normal rules don't apply.

But now it seems that the markets have accomplished what common decency couldn't - they have forced Silvio Berlusconi out of power. Tonight the Italian leader announced he will step down.

Rumours to this effect were swirling yesterday, causing European markets to rally and the euro's value to shoot up. But then Berlusoni issued a denial of the rumours on his Facebook page (where else?) and the markets tumbled. This was a clear sign: the markets had lost any shred of faith in Berlusconi to implement the reforms he promised European leaders last month. Berlusconi has survived many things, but when it came to the all-powerful markets that seem to be calling the shots these days, he was no match.

Who is the villain in the eurocrisis movie?

Cannes has seen its fair share of cinematic flops over the years. But this red carpet-laden city on France's south coast has never seen a political flop like the one it witnessed over the past two days. It had all the elements of an edge-of-your-seat political thriller: high stakes, sudden plot twists, personal rivalries and looming global disaster. But who is the villain in this particular script? Today there was plenty of finger-pointing to go around.

The leaders of the world's 20 richest countries intended to come to Cannes to come up with a solution to global economic crisis which is quickly spiraling out of control. But a shock announcement Tuesday from the Greek prime minister that he would hold a referendum on Greece's acceptance of the bailout package worked out last week changed all that. The resulting outcry threw the Greek government into disarray, putting it near collapse - which could have precipitated a global emergency. The leaders of the 20 richest countries in the world ended up working out nothing, spending the entire summit glued to their blackberries waiting for news from a tiny country in the Mediterranean.

The leaders left Cannes tonight with nothing to show for their meeting. No plan to save the eurozone, no funding, and no consensus. Indeed the G20 summit has ended with the world in a worse state than it was in when it started. Europe, and the world, could be just days away from economic collapse if the Greek government collapses tonight in a no-confidence vote scheduled for midnight.

Will Europe be saved tonight?

I'm here at the big EU summit in Brussels, the D-day event that is being billed as the last chance to save the Euro and prevent a collapse of the European economy. Even if the leaders emerge from those fortified doors having done everything the markets are asking, there will still be a long road ahead in this crisis. But this could be the moment they were finally able to turn the tide and appear in control.

Or it could be remembered as the moment where the entire European project collapsed. The tension in the press room is palpable. It's hard to say if it's coming from the stressed-out journalists or seeping in from the inner chambers where the European leaders are meeting. Either way, I would venture to say the Justus Lipsius building (or 'Just Lips' as I like to call it) is one of the most tense places on earth at the moment.

The markets need the leaders to come out of those doors and tell the press room two things: First, that they have amassed a trillion euro war chest to protect all of the Southern European economies, including Italy and Spain, from collapse. Second, that Italy has agreed to put in place a drastic austerity plan in line with what is being imposed on Greece.

The Knox verdict: another humiliation for Italy

These are embarrassing times to be Italian. The country is in a financial mess, on the precipice of becoming the latest victim of the debt crisis. The prime minister is now regarded even by most Italians to be a national embarrassment, yet he still clings to power. The waste crisis in Naples has spiralled out of control, and Italy's handling of migrants from North Africa during the Arab Spring has drawn condemnation from human rights groups and European leaders alike. Even their prime minister has heaped scorn upon Italy, calling it a "shitty country". The last thing Italians needed was another embarrassment.

As I write this, Amanda Knox is boarding a plane in Rome, heading back to her home in the US after four years in an Italian jail for a crime the judiciary now says she did not commit. Yesterday's verdict of innocence, the conclusion of the most closely-watched Italian court case in decades, brought jeers and condemnation not just from the crowd of Italians outside but also from the Italian media. Many in Italy see the verdict as the judiciary bending to American pressure. But other Italians agree with the sentiment felt abroad - particularly in the US – that the Italian judiciary and police system are so flawed there was no way Ms Knox could be convicted without significant doubt about her guilt.

Berlusconi: Italy is a "shitty country"

He's survived sex scandals, corruption investigations and insurrections – but can Italian prime minister Silvio Berlusconi survive in his post even after insulting the country he rules? Considering the shocking vulgarities he has been caught using while referring to Italy in a secret recording, this may be too much for even the Teflon Prime Minister to fend off.

The recording, made in July but released this week, catches Berlusconi saying he wished he could leave Italy – saying it is a "shitty country" that "sickened" him. The recording was made by Italian police, who were investigating allegations that Berlusconi was paying a man to corroborate his story that he was unaware the women supplied to him for his infamous "bunga bunga parties" were prostitutes.

The transcript of the recorded conversation came to light after police arrested a wealthy Rome businessman and his wife in a raid at dawn on Thursday, charging them with blackmailing Berlusconi. They allegedly demanded payment from Berlusconi in order to keep quiet about arranging the prostitutes for him. Berlusconi has admitted paying them but says he wasn't blackmailed and did it voluntarily.

Where does the Norway shooting leave Europe’s conservatives?

Last week’s far right terrorist attack in Norway has prompted a lot of questions in European capitals, and many of the hardest questions are being asked inside the party headquarters of Europe’s center-right. Many of Europe's conservative parties have spent the last few years courting the far right vote, by co-opting some of their messages on immigration and cultural identity issues. In several countries including Denmark, Italy and the Netherlands the mainstream conservative parties have even allied themselves with the far right and invited them into governing coalitions. After the Norway attack, are those days over?

To answer this question, one must understand the current political balance in Europe, and why it has come about. Conservative parties now dominate the national governments of Europe as well as the EU institutions, relegating the left to just a few Southern countries. The Guardian put out a great interactive map today where you can trace Europe’s left-right balance over the past 50 years. Contrast the map just ten years ago in 2001 on the left with today’s situation in 2011 on the right (left-of-center in red and right-of-center, including Liberal parties, in blue). Considering that Spain and Greece now have their policies dictated to them by their conservative Northern European creditors, the left has effectively disappeared from Europe.

So why has Europe veered rightward at a time of economic crisis? There are probably many contributing factors – but the biggest cause is the complete disarray of the European left. From Scandinavia to Germany to France to Italy, European Social Democrats are in complete chaos, torn by infighting, a lack of enthusiasm and confusion over ideology. Europeans have voted conservative not because of some great ideological shift toward economic liberalism and laissez-faire capitalism. They have done so because the parties of the left have not offered any credible alternative for governance.

Eurozone in panic: Is Italy next domino to fall?

The Eurozone is looking at several doomsday scenarios this week after Italy emerged as the latest EU state to face serious and sudden attack by international bond and security markets. After a very public spat between Prime Minister Silvio Berlusconi and his finance minister, and with the continued political uncertainty over Berlusconi's position, the markets have decided Italy may not be safe to lend to any longer.

With the paralysis in the country's government likely to prevent decisive action to confront the crisis, some are saying Italy is perhaps days away from becoming an economic failed state. And unfortunately it is not too big to fail, but it is too big for the EU to bail out.

Such extreme rhetoric may or may not be justified, depending on who you talk to. But the risk is extreme. The countries that have so far fallen victim to the debt crisis and required an EU bailout – Portugal, Ireland and Greece – are relatively tiny and their debt makes up less than 5% of overall eurozone public debt. If worse came to worse, France and Germany could afford to buy back all of their debt combined.

Europe's left continues to disappear

Yet another centre-left European government was ousted yesterday as the Portuguese voted overwhelmingly for the country's conservatives. Prime Minister Jose Socrates' Socialists, who have been in power since 2005, received just 28% of the vote. The centre-right party, bizarrely named the 'Social Democrats' (a legacy of Portugal's desire to avoid conservative-sounding names reminiscent of the dictatorship) got 37% of the vote, just short of an overall majority. They will form a coalition with the further right People's Party who polled at 11%.

"Centre-right wins in _____" is becoming a familiar headline for European Monday mornings. Conservative governments are re-elected, while centre-left governments are voted out. The left hasn't won an election here since the Socialists took power in Greece in 2009. With the Portuguese Socialists gone, this leaves the EU with only five centre-left governments - Greece, Cyprus, Austria, Slovenia and Spain. Compare this to the 19 governments controlled by the centre-right - plus three controlled by the right-leaning free-market Liberals.

Given the disastrous local election results for Spain's Socialists two weeks ago one can assume they will fall from power in the country's general election next year, if not earlier. This will leave the left with essentially no presence in Europe. It is an unprecedented situation in modern European history - the first time since the advent of widespread Democracy that the European left has had no voice.

Berlusconi: Milan will be 'full of Muslims and Gypsies' if Left takes power

Italian prime minister Silvio Berlusconi may have outdone even himself with his latest inflammatory comments. Rallying supporters in Milan ahead of local elections later this month, he warned people that if the centre-Left candidate for mayor wins, the city will be handed over to Muslims and Gypsies. According to Italian news agency AKI he told the Milanese,

"Milan can't become, on the eve of the Expo 2015, an Islamic city, a city of Gypsies, full of Roma camps and swamped by foreigners, a city that gives voting rights to immigrants in municipal elections."

The comments, which were not an off-the-cuff remark but rather part of a prepared speech that was also posted on the website of Berlusconi's conservative People of Freedom party, were met with open-mouthed disbelief by the leader of Italy's largest centre-left opposition Democratic Party. "Your words are laughable..you're going to need to wear a burqa to avoid people recognising you in the street," he told the Italian leader.

Is Italy the worst place in Western Europe to be gay?

Today is the International Day Against Homophobia (IDAHO), and a European gay rights group has taken the opportunity to publish an updated map of the human rights situation for gays, lesbians and transgendered people in Europe. Italy has clocked in at the bottom of the league, scoring worst than every EU country except Cyprus and Latvia. Meanwhile the UK scored highest, moving up from sixth place the previous year.

This year's map (pictured right) from the International Lesbian, Gay, Bisexual, Trans and Intersex Association (ILGA) gives countries a dark green for being progressive on gay rights, lighter green for being somewhat progressive and grey for being poor on gay rights. Countries in the 'red zone' are accused of "gross violations of human rights and discrimination". The factors used to determine the rankings included whether the country has anti-discrimination legislation, gay marriage, parenting rights, hate crime laws and whether the country has allowed pride demonstrations to take place.

Berlusconi and Sarkozy slam on the brakes

Usually it's the Northern European countries that are the ones clammoring for rollbacks on EU integration. But in a strange twist this week it's the reliable core stalwarts of France and Italy that are agitating for a step back in the EU integration project. The leaders of the two countries sent a letter to the European Commission yesterday asking for the ability to re-establish border controls between Schengen states in 'exceptional circumstances'.

The letter was sent after Nicolas Sarkozy and Silvio Berlusconi held a summit in Rome yesterday trying to diffuse the diplomatic crisis between the two countries. Italy has demanded help from its EU neighbours, saying that it can't handle the influx of economic refugees floating across the Mediterranean to escape the chaos in North Africa and landing on Italian shores.

Deciding that the EU wasn't acting fast enough to provide assistance, Silvio Berlusconi's government started issuing the migrants with "temporary residence visas" and telling them they could use them to seek work in other EU states, knowing full well that the French-speaking Tunisians and West Africans would go to France. The French were furious, and started stopping trains at the French-Italian border which they suspected of carrying the migrants. Each side is accusing the other of violating the EU's Schengen agreement, which allows passport-free travel between member states.

Tensions flare at French-Italian border

France and Italy are locked in a war of words today after France stopped several trains from crossing the border between the two countries over the weekend. France, suspecting that Italy was trying to dump North African immigrants into the country, stopped the trains at the old border station between Ventimiglia and Menton, 20km east of Nice. Now, each country is accusing the other of violating the rules of the EU's passport-free Schengen Zone.

Since the pan-Arab uprising began in January in Tunisia, Italy has been sounding the alarm bell about an increase in migrants trying to cross the Mediterranean to escape the chaos in North Africa. The tiny Italian island of Lampedusa, just off the Tunisian coast, has been inundated with refugees washing up on its shores in makeshift boats. There are now more migrants housed in a refugee camp on the island than there are residents.

Italy has asked the EU for assistance in dealing with the migrants, most specifically through deployment of the EU's Frontex border patrol force. They have also asked other member states to contribute financially to the effort, saying that Italy can't afford to patrol the EU's borders all on its own. Because the Schengen Zone is a passport-free area, most of the migrants crossing into Italy are just trying to get into the EU. Once they get into Italy they can go to France, Sweden or Germany without facing a border check.