A funny thing happened on my way to an international forum on democracy and human rights in Rome last week: the Italian government fell. It was hard to concentrate on the business at hand with crowds gathering in piazzas to demand the head, figuratively speaking, of the man who has dominated Italian politics since 1994—Silvio Berlusconi.
What sparked the crisis was a sharp spike last week in Italian bond yields, which raised doubts about Italy’s ability to service its $2.6 trillion debt. The prospect of a default by Europe’s fourth-largest economy sent tremors throughout the euro zone. Forget about Greece: If big countries like Italy and Spain can’t pay their debts, European banks that hold all that sovereign debt will fail. Then someone—most likely Germany—will have to finance a massive bank bailout just like the United States did in 2007. Otherwise, a financial collapse would likely throw Europe, and probably the United States, into a bona fide depression.
Fortunately, this prospect seems to have concentrated minds in Italy. Arriving in Rome on Thursday, I found its usually fractious political class galvanized by the crisis and resolved to put a new government in place before the markets open today.
On Friday, the Italian Senate passed a budget with an initial set of reforms (including a hike in the retirement age) tailored to European Union specifications. On Saturday, Berulsconi resigned, as gleeful crowds chanted “Bye Bye Silvio” and sang the “Hallelujah” chorus outside the Quirinal palace. And on Sunday, Mario Monti, a widely respected technocrat, agreed to form a unity government.
As our own Congress dithers endlessly over debt reduction, it was nice to see democratic politicians somewhere acting purposefully and with dispatch. How long the Monti government will last, however, is anyone’s guess, especially since it must pass painful reforms aimed at paring down bloated state bureaucracies and stimulating private enterprise. But Rome’s tumultuous weekend seems to have made several things clear.
First, Italy’s sovereign debt crisis probably has driven a stake through the political heart of Berlusconi. In recent years, he has presided more than governed as Italy’s once-vibrant economy slowed down and its borrowing soared. Like a latter-day Nero, the 75-year-old Berlusconi, Italy’s richest man, seemed more interested in fiddling with underage girls in “bunga-bunga” parties than tackling structural reform of Italy’s economy.
Second, Berlusconi’s fall and Monti’s government of national unity have the potential to rescramble Italian politics in useful ways. Beneath a top layer of supposedly apolitical technocrats, Monti is expected to fill key sub-cabinet level posts with leaders from the center and center-left, shutting out the right-wing Northern League as well as the left’s unreconstructed Communists and Socialists. This could spur the emergence of a new coalition of the progressive center dedicated to reviving Italy’s global competitiveness rather than rehearsing old ideological arguments. Such a coalition might include pragmatic progressives like Rome’s former Mayor, Francesco Rutelli and Gianni Vernetti, whose Alliance of Democrats organized a fascinating, if overshadowed, conference featuring democracy activists from the Middle East, North Africa, China, and elsewhere.
Third, the imbalance between the power of global markets and the weakness of European governance has reached a sort of tipping point. The markets are now punishing spendthrift governments like Greece and Italy that have borrowed massively to cover the growing gap between public spending and anemic private sector growth. For these and other European countries, joining the euro-zone in 2002 was an opportunity to relax fiscal constraints, because such profligacy would no longer lead to currency devaluations. It turns out, however, that a common monetary union also requires common fiscal policies, and the 17 members of the euro-zone have no institutions for setting or enforcing such policies.
At its heart, then, the euro crisis is really a political crisis. I heard many Italian political leaders over the weekend argue that the salvation of the euro lies in “more Europe.” This means a resumption of the stalled march toward more comprehensive economic and political integration, which of course means EU members must surrender more sovereignty. This won’t be easy, especially if to average Europeans it means the pain and sacrifice of a thorough-going fiscal retrenchment, or bailouts for countries that have evaded the consequences of irresponsible policies by free-riding on the euro.
Italians, nonetheless, seem ready to cast their lot with Europe, even as they search for more effective political leadership to revitalize their economy.
Photo credit: Downing Street

If you want to see what a society without law or civic space looks like, go to Burma. A half century of military misrule has devastated this once fertile center of Asian science, scholarship, law, commerce and civic debate. But in this desert, Burmese activists are preparing to seize the potential democratic space recently opened up by the new regime. Last month, it issued a new labor law, the Labor Organization Law, which appears to allow independent unions to register and function legally for the first time in memory.
Top U.S. officials this week accused Pakistan of abetting a terrorist group responsible for attacks on U.S. forces in Afghanistan. The bombshell here isn’t Pakistani duplicity—that’s old news—but the Obama administration’s decision to go public. It means Washington finally has run out of patience with our supposed “ally.”
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PPI’s Will Marshall and Jim Arkedis have a piece in the Detroit News this morning on the defense budget. Here’s an excerpt:
PPI Senior Fellow Josh Block writes in
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Yesterday, Jim Arkedis, director of PPI’s National Security Project, gave his 
Both the House of Representatives and the president have shown that when it comes to Libya, NATO is not the only organization susceptible to bouts of friendly fire. A bipartisan group of ten congressmen