At the heart of Europe, police have begun fingerprinting children on the basis of their race - with barely a murmur of protest from European governments. Last week, Silvio Berlusconi's new rightwing Italian administration announced plans to carry out a national registration of all the country's estimated 150,000 Gypsies - Roma and Sinti people - whether Italian-born or migrants. Interior minister and leading light of the xenophobic Northern League, Roberto Maroni, insisted that taking fingerprints of all Roma, including children, was needed to "prevent begging" and, if necessary, remove the children from their parents.

The ethnic fingerprinting drive is part of a broader crackdown on Italy's three-and-a-half million migrants, most of them legal, carried out in an atmosphere of increasingly hysterical rhetoric about crime and security. But the reviled Roma, some of whose families have been in Italy since the middle ages, are taking the brunt of it. The aim is to close 700 Roma squatter camps and force their inhabitants out of the cities or the country. In the same week as Maroni was defending his racial registration plans in parliament, Italy's highest appeal court ruled that it was acceptable to discriminate against Roma on the grounds that "all Gypsies were thieves", rather than because of their "Gypsy nature".

Official roundups and forced closures of Roma camps have been punctuated with vigilante attacks. In May, rumours of an abduction of a baby girl by a Gypsy woman in Naples triggered an orgy of racist violence against Roma camps by thugs wielding iron bars, who torched caravans and drove Gypsies from their slum homes in dozens of assaults, orchestrated by the local mafia, the Camorra. The response of Berlusconi's government to the firebombing and ethnic cleansing? "That is what happens when Gypsies steal babies," shrugged Maroni; while fellow minister and Northern League leader Umberto Bossi declared: "The people do what the political class isn't able to do."

This, it should be recalled, is taking place in a state that under Benito Mussolini's fascist dictatorship played a willing part in the Holocaust, during which more than a million Gypsies are estimated to have died as "sub-humans" alongside the Nazi genocide perpetrated against the Jews. The first expulsions of Gypsies by Mussolini took place as early as 1926. Now the dictator's political heirs, the "post-fascist" National Alliance, are coalition partners in Berlusconi's government. In case anyone missed that, when the Alliance's Gianni Alemanno was elected mayor of Rome in April, his supporters gave the fascist salute chanting "Duce" (equivalent to the German "Führer") and Berlusconi enthused: "We are the new Falange" (the Spanish fascist party of General Franco).

So you might have expected that Berlusconi would be taken to task for his vile treatment of the surviving Roma of Europe at the G8 summit in Japan this week by those fearless crusaders for human rights, George Bush and Gordon Brown. Far from it. Instead, Bush's spokesman issued a grovelling apology to the Italian prime minister on Tuesday for a US briefing describing his "good friend" Berlusconi as "one of the most controversial leaders of Italy ... hated by many".

It has been left to others to speak out against this eruption of naked, officially sanctioned racism. Catholic human rights organisations have damned the fingerprinting of Gypsies as "evoking painful memories". The chief rabbi of Rome insisted it "must be stopped now". Roma groups have demonstrated, wearing the black triangles Gypsies were forced to wear in the Nazi concentration camps, and anti-racist campaigners in Rome this week began to bombard the interior ministry with their own fingerprints in protest against the treatment of the Gypsies. But, given that the European establishment has long turned a blind eye to anti-Roma discrimination and violence in the Czech Republic, Hungary and Romania, along with the celebration of SS units that took part in the Holocaust in the Baltic states, perhaps it's no surprise that they ignore the outrages now taking place in Italy.

The rest of us cannot. There are particular reasons why Italy has been especially vulnerable in recent years to xenophobic and racist campaigns - even while crime is actually lower than it was in the 1990s (and below the level of Britain). The scale of recent immigration from the Balkans and Africa, an insecure and stagnant job market and the collapse of what was previously a powerful progressive and anti-fascist culture have all combined to create a particularly fearful and individualistic atmosphere, the leftwing Italian veteran Luciana Castellina argues.

But the same phenomena can be seen to varying degrees all over Europe, where racist and Islamophobic parties are on the march: take the far right Swiss People's party, which on Tuesday succeeded in collecting enough signatures to force a referendum on banning minarets throughout the country. In Britain, as Peter Oborne's Channel 4 film on Islamophobia this week underlined, a mendacious media and political campaign has fed anti-Muslim hostility and violence since the 2005 London bombings - just as hostility to asylum seekers was whipped up in the 1990s. The social and democratic degeneration now reached by Italy can happen anywhere in the current climate.

Italy has a further lesson for Britain and the rest of Europe. Berlusconi's election victory in April was built on the collapse of confidence in the centre-left government of Romano Prodi, which stuck to a narrow neoliberal programme and miserably failed to deliver to its own voters. Meanwhile, centre-left politicians such as Walter Veltroni, the former mayor of Rome, pandered to, rather than challenged, the xenophobic agenda of the rightwing parties - tearing down Gypsy camps himself and absurdly claiming last year that 75% of all crime was committed by Romanians (often confused with Roma in Italy).

What was needed instead, as in the case of other countries experiencing large-scale immigration, was public action to provide decent housing and jobs, clamp down on exploitation of migrant workers and support economic development in Europe's neighbours. That opportunity has now been lost, as Italy is gripped by an ominous and retrograde spasm. The persecution of Gypsies is Italy's shame - and a warning to us all.

s.milne@theguardian.com