Italy’s inability to sort out their bureaucracy really doesn’t help. (Ever tried to sell/buy a house in Italy, compared to, say Sweden? It is absurd.) Not that it is their only problem. But when rational people vote for Berlouisconi as prime minister, then you know you have a problem at multiple levels, imho.

This. The problem wasn’t too much austerity, it was that the pendulum seemed to always swing to extremes. Banking policy was always painted as a binary choice of excessive welfare financing or heartless spending cuts.

Were austerity instructions handed down by the EU or did the individual member states decide to implement it themselves?

Handed down but up to countries to follow them. As the article states, Italy appears to have followed them to the letter, more so than Germany or France, but hasn't ended up in a great place.

Handed down. The austerity has been a condition of the bailouts from the ECB & IMF. The Greeks even voted against the terms in a referendum which was immediately overturned. In Italy the EU even went to the lengths of appointing their own man to oversee the terms: https://en.wikipedia.org/wiki/Mario_Monti#Prime_Minister_of_...