The Italian spread…

Hey, Italian spread? Nice for a slice of bread perhaps? Or are we not talking about spreads or the famous Spreadable cream that tastes like hazelnuts? Well no, no sweet rolls this time!

In Italy we have been thrown to death every day for years with (or informed about)'the spread'. It is a word that every Italian knows, but certainly not everyone knows what it really means. The word has to do with Europe, that's for sure. It also has to do with the Italian politics. But what about exactly?

It is certain that the spread is discussed every day by all Italian media and is often used to indicate that 'Italy' is doing something wrong. If the spread rises, this indicates that Italy has not communicated or decided 'the right thing'. If it goes down, Italy (according to whom?) is on the right track.

Lo spread: l'introduzione

In 2011 reigned Berlusconi then more or less suddenly'the spread' began to rise enormously. To save Italy, Berlusconi then had to leave to make way for the Monti government, not elected, but "just technically". The spread had entered and was allowed to stay, for the word worked wonders. 

It was thought at the time that the Monti government would bring Italy back into line. The spread remained high, however, and government debt rose by 13 percentage points. So in retrospect it may not have been such a success, that 'technical' government. Not that what followed was that much better, but that's another story.

Lo spread: a little explanation

Okay, the spread. What are we actually talking about? It is the difference in yield between German and Italian government bonds. if the spread high, it is a sign that the markets have little confidence in Italy compared to the confidence they have in Germany. The interest on government bonds of Italy is higher than that on government bonds of Germany and that difference is called the spread. 

In Italy we hear and read about it every day the spread, often with panicked and gasping comments about how crappy Italy is again, how dangerous this or that one in this or that government, how daring a comment from someone because that the spread is rising and lately how nice it is that we now have a government that is pro-Europe because the spread has fallen again.

Apparently we think it's quite normal for the financial markets to decide whether Italy is doing well or not. That poverty is steadily increasing, that there are hundreds of thousands Italian youth have moved to other countries for a better livelihood, that wages continue to fall while the cost of living rises… none of that matters much, if the spread but kept under control. That is to say: as long as the financial markets think that Italy is doing well.

Critical of the European Union

In order to understand why a growing group of people in Italy are critical of the European Union, the spread might help. In the Netherlands you never hear about it and it seems that the government has the power to run the country autonomously (although here too 'the EU has to do that' is a frequently heard excuse).

In Italy people are ruled by the spread, so by the opinion or expectations of the financial markets. After years of hearing about this spread, it seems like an Italian government has no power whatsoever to do anything because "sale lo spread' (the spread rises). 

Of course there are more reasons that Italy has a growing group of people who are against the EU and see the euro as a problem, but the spread is a good example, because we may be together in the EU with each other, but the differences between countries and the types of communication within those countries are huge.

It is difficult for the Dutch and other Northern Europeans to understand what is going on in Italy, but know that the spread topic of the day here is an element that might help.