As Paul Krugman has sarcastically noted, many policymakers listen to austerity-obsessed economists simply because those economists are "Very Serious People".
And all of a sudden, these people are serious about forcing Italy to jump off the same cliff as Greece, Ireland and Portugal. Pass the austerity package proposed by prime minister Silvio Berlusconi and finance Minister Giulio Tremonti, they say, or Italy is doomed.
There are two problems with this idea. The first is Italian: our government's solutions lack both imagination and credibility. Italy will not survive this crisis by listening to the very people who got us into it, especially not when they demand that the middle class and poor foot the bill for their failures.
The second problem is European. Instead of creating solutions adapted to each nation's economy, governments now have an obsessive fixation on employing tighter control of budget deficits to satisfy the European stability pact. Economic policy has become an exercise in pure dogma, devoid of any real debate on how to make the euro work or promote sustainable growth.
It is dead serious – and dead wrong. In 2008 this dogma told the Irish to bail out their banks. In 2010 it told the Greeks that just one round of austerity would do the trick. In 2011, it tells Italy to cut investments in renewable energy and drastically reduce social spending, imposing a straitjacket on already cash-strapped local governments.
Does it matter that we are not Greece, that our deficit is largely self-financed and our personal savings rate is high? Or that we are not like Spain? That – despite Tremonti's best efforts to import real estate speculation to Italy in the early 2000s – we Italians had no speculative housing bubble? No, the Very Serious People say. Italy is in critical condition, and a dose of Tremonti's austerity package is exactly what we need.
Except that this kind of austerity is no fix. If approved and implemented, Tremonti's package will be a €45bn social catastrophe. What we must do instead is turn this policy on its head. Admittedly, Italy does have a very high debt to GDP ratio, but our country needs to focus on the GDP side of that number. Italy's problem is as much about growth as it is debt.
This cannot happen unless we replace wasteful expenditures with intelligent public investments. Instead of pouring billions of euros into boondoggles like Berlusconi's bridge to Sicily, we need to invest in infrastructure that increases productivity. We should expand – not cut – investments in a renewable energy sector, education, research and development.
Taking these steps will require a new government. Italy needs elections, because only a completely new governing class can achieve the political consensus to design and implement a plan to tackle the crisis. Investors in Italian bonds will surely understand that, in a country where tax evasion drives the deficit, they cannot expect our richest citizen to crack the whip on fiscal discipline. As demonstrated by its clumsy attempt to insert a clause into the budget that would save Berlusconi from paying €560m in damages stemming from a bribery case, this government has been far more interested in advancing the priorities of the prime minister and his wealthy friends than those of ordinary Italians.
In opposing Berlusconi and Tremonti's plan I do not mean to dismiss European unity – but I do reject the one-size-fits-all mindset that has caused so many problems. We cannot continue to imagine that a single European solution applies equally well on the isles of the Aegean as in County Cork.
The stability pact is not the 11th commandment. We can and must renegotiate its framework to allow for more flexible standards, and prioritise the thing that matters most to all Europeans: jobs. It does us little good to please the out-of-touch elites of our capitals while the people have to tighten their belts and our youth are robbed of their future.