An Italian friend of mine plained to me while painfully witnessing the climax of the Italian debt crisis: “Cosi Berlusconi, cosi l’Italia!” (As with Berlusconi, so too with Italy!).

My ment was an allusion to the Italian Prime Minister’s personal responsibility in dragging the entire Italian nation down with him. News broke late on Wednesday that Berlusconi had agreed to step down from office, as he effectively admitted his 17 years of political power had done nothing more to fix a broken system and as more members of his loose PDL coalition defected to centrist parties.

Even with the likely passing of the European Union fiscal reform measures designed to control Italy’s reckless public spending, it all seems too little too late.

With Berlusconi’s suprise announcement and Italy teetering on national debt default, the European stock markets tumbled late Wednesday. Logically, my friend then said, “Vedi? E cosi anche l’Europa” (See? And so too with Europe).

The domino effect is ing a real potential. It is frightening. It is downright disturbing for anyone living and trying to survive in Europe. Still, we have to be careful of where we start pointing fingers.

My friend’s Berlusconi = Italy = Europe linear equation is not necessarily totally inaccurate.

The Italian Premier actually deserves some of the blame. For instance his center-right coalition government did recently raise capital gains taxes (from 10 to 20%!) along with corporate, personal e and VAT. This has further scared off the few serious local and foreign investors left in Italy and has sparked greater passion for the national pastime: tax evasion. This is the worst time to be raising taxes when economic growth is so wobbly at home. Berlusconi is an entrepreneur himself. He should know better. It is a total mystery why his business-friendly government is caving into Keyensian economic rebuilding.

All said, Italy and Europe is not a one-man disaster. Nor even a one-party disaster.

Italy’s national debt crisis is, above all, a crisis of national character – an Italian character that has e softened while shedding off its once great virtues of resilience, fortitude, integrity, self-reliance and innovation, just as we have seen in a paradigmatic shift in character with the rise of the modern Western European welfare states (watch Acton Media Director Michael Miller’s Acton Lecture – The Victory of Socialism, where he explains why socialism counts on citizens’ progressive external dependency on institutions and a loss of personal virtue).

France, Spain, Britain Germany Greece, Portugal, Belgium, Denmark. Take your pick: all have lost many of these same virtues of character in varying degrees. The Great Generation of post-World War II Europe is now too old to play the part e-back hero.

No matter how great a vision or “business plan” the entrepreneurial Berlusconi had for Italy since the mid-1990s, no amount of collective cultural effort was ever possible when his country and Continent has lost its spirit of freedom and independence from big government and generous public programs.

National debt, while symptomatic of unsuccessful political regimes, is more the result of a national deficit of values and virtue.