WHENCE ITALY?
WHENCE ITALY?
“May you live in Interesting times” is an ancient curse which seems tailor made for 2020, but if this year could pick where to establish its main home address, look no further than my country. Of course, we had an early start.
Where we come from
Italy had a shock general election in 2018, where the “Movimento 5 Stelle” ( M5S) exploded on the national stage, winning about a third of the national vote, and becoming the sensation of the decade. While the centre right coalition, formed by Lega (Salvini), Forza Italia (i.e., Berlusconi) Fratelli d'Italia (Meloni), and some others, won a majority with 37% of the vote. By the way, do not bother trying to understand Italy's electoral system: suffice to say that in the recent past two electoral system were introduced but never used, one was, and currently there is for any practical purposes none.
After some consultations by President Mattarella, largely inconclusive since there were no clear chances of forming a government able to pass the Parliamentary approval, I thought we'd go to a snap election... and I was wrong, because there was a literal Pact.
In a way not dissimilar to the Triumviri of ancient Roman times, Lega and M5S negotiated an agreement that avoided another election and went on to form the first Conte government, complete with a “government contract1” that defined, in writing, what this odd couple wanted to do with our lives. Bear in mind that “Contract” aspect, it will come handy shortly. Finally, the two outcasts could enter the Palace of power, albeit joined at the hip rather uncomfortably, and with a Council President, Giuseppe Conte, who was an unknown quantity coming off a politically Catholic background, suave, and able to smooth ruffled feathers.
Of course, Italian politics being what it always have been, many pre electoral differences were more fictitious than real, opposites attract, and anyway in Italy you don't DO things: you simply talk, while the real powers, that are quite above such vile things like subjecting themselves to popular votes, govern the country according to inalienable rights. Their rights.
So, out went the “Nord” (North) in Lega Nord, since the republic is one, indivisible, and with as little practical autonomy as possible, lest the clear differences between regions and areas bring a broken up situation like that prevailing during the …. Renaissance. The “Let's leave the EUR/Break EU deficit rules” screams remained for propaganda purposes, but quite well muffled, and no one really cared even in the parties that apparently pushed for that. While Salvini has no claim to academic prowess in any field, he's a rather shrewder politician than most give him credit for, so he left in his party a number of “dog whistles” to ensure that his opposition, mainly the leftish PD glitterati, never left voters in the dark about their manifest destiny to lead the nation thanks to their intellectual superiority. A thing that everybody knows brings a lot of votes in the bondoocks, in the crowd of small firms that strive to make it a day more.
Italy has escaped an After Action Report on the Greek restructuring, but enough people in politics has done the homework to understand the crude reality behind Varoufakis music pun :
“You can check out any time
you like
But you can never leave “
what was left suited the establishment to the last T: an openly “deficit and spend” bent, a social and labour program to make government unions drool, and under the largely ineffective growth effort of the ECB a renewal of massive transfers of resources, even between areas and generations, that to a Space traveler just back from a twenty years trip smelled of “good old days”.
DRAMA!
At some point tough, well before COVID, something broke between this unlikely couple. My hunch at the time was that Salvini had a firmer grip on the difficult situation the country was in and he thought that fresh elections were a preferred option, and anyway a temper tantrum would distance him from the very unpalatable measures that would have to be passed to comply with EU rules... especially since as part of the original agreement, there was an added yoke he had to pass under, the One Ring for power in Italy: he couldn't name the next President of the Republic when Mattarella expires, in 2022. So, he backed out, and the Conte 1 government was no more in mid 2019 . Contrary to Salvini's expectation no. 1, a Conte 2 government was formed, composed of M5S and PD, the traditional left party, with a long history of mutual loathing with the M5S they are currently governing with. This new government had no strong majority in parliament, considering the worsening economic situation, so M5S came with a smart trick: they called for a reduction of seats in both houses of parliament “in order to cut costs”, among other reasons. If voted with the necessary majority it would have been immediately effective... but it would have called for a looong process to redesign the seats according to geography, population etc. Think “Gerrymandering”, but on a scale akin to comparing Apple (the company) to your corner mobile phone peddler. No way it can be done before the legislature ends, plus with one third of the seats gone, the appetite for early elections is reduced considerably. No Turkey votes for Thanksgiving.
However, the necessary majority wasn't found in parliament and a referendum had to be voted on by ….. Citizens! Oh , the HORROR !!!
Luckily, no party representative wanted to speak against a guarantee of two year salary, so ALL parties canvassed FOR the reform, see “turkey” above. The measure passed (along with a number of regional elections, where the government parties did not get routed, albeit losing ) and in Italy as of now it's IMPOSSIBLE to have a general election.
In the meantime COVID struck, and the EU has decided to implement both a Recovery Fund and a special version of the European Stability Mechanism .
What Now??
Fast forward to today, and we have a resurgence of COVID and a resulting second economic hiccup. As always, troubles play against sitting governments, if the opposition is shrewd enough. But, thanks to the referendum result, the big prize has been taken off the table: you can shuffle your hand of cards as much as you want, but you can't change them , and a couple of Jacks may not carry the pot. Salvini, moreover, has been losing steadily in favour of Giorgia Meloni, and his double standard policy (Lega is nominally a federalist party in the northern regional elections and a nationalistic party in national polls) may not be carried indefinitely. The clincher is easily read if you close your eyes and ears and try as much as possible to coldly dissect both EU and National response to COVID for clues. And the first clue is... Neither the EU nor Italy have put COVID response first in their policy choices. And no, neither is economic recovery first.
Any man or organization may define himself by what he owns, but onlookers may be better off by searching for what owns HIM. A dominant housewife of a brilliant billionaire is not worth minimum wages, she owns him. And both the EU and Italy, in various guises, have been adamant in their response: NO MEASURE will be taken if it diminishes previous commitments and/or subjects them to a “value for money” scrutiny.
Hence, Conte and is governments meet the national labour unions, but not company representatives at the same time. Bank foundation shareholders are likely to get tax breaks to counteract the ECB ban on dividends. A firing ban that was due to expire shortly has been extended through March 2021. More and more “compensations” are granted to the traditional political constituencies, putting an heavy burden to present and future wealth producers. You see, Italy was quite adapted to crises that shared a number of features:
any individual flashpoint had to be a small percentage of GDP;
The eventual final conclusion could be shifted forward by law;
its costs could be spread out via fiscal and monetary policy instruments, plus a number of EU blind eyes.
COVID changes the parameters because, as the late inhabitant of Les Invalides said, “I will always trade space for time2”. Under COVID, space and money are useless and time is accelerated, in a way that was familiar to past generations used to stressors but not to this one: it doesn't matter that you have 500 bn EUR, you cannot produce a vaccine or a fully trained hospital crew instantly, no more than you can have a child in five weeks, or wine in two months starting with grapes: you might as well put that money into a time travel project because that is the only use that would really work. All other responses are rearguard actions... like the one Italy finds itself in . Believe me, it can be pretty gruesome. And that comes from someone who had the luck and honour of knowing a military priest who had lived the Italian Army retreat from Russia. If you think COVID is bad, Nikolaevka beckons.
So, you would need an hard nosed , mentally prepared, very intelligent leadership to take charge, think ahead, plan accordingly and above all be honest with the population in telling what the challenges will be. We've had civil unrest here in many cities, as people may know. So far, from my perch those were just a tiny bit worse than Sunday brawls and petty thievery, the usual things that happen when newly minted captains establish bans from 1800 to 0700 and no old hand is around to tell that if you take out the people from the streets, no thief is afraid because no one sees him . Those were, I am sorry to say, smash and grab operations which are not a threat... now. But people get tired of waking up and have to check the news to know what new fancy rule has come out yesterday, even in a country used to wayward and senseless rules.
BUT, for now, the traditional political class is still very much in charge, and as long as the money flows from the ECB (and the US) they will resort to the oldest response in the book, “unity”. I personally think that while new elections are off the table, the days of the present center left government are numbered. For better or worse, I think we will have an enlarged government before Spring is upon us, maybe even before the year is out. It will be a sad “discorso del Presidente della Repubblica”, which happens every year at New Year's eve, if Mattarella cannot pull a rabbit out of his hat. Salvini would be the perfect response, he has already governed with M5S and PD and M5S loathed publicly each other as much as Salvini and PD. Moreover, it could not be CALLED “unity government” if Salvini is left free to harangue the mob. Nothing spells “2020 has ended” more than a Drury Lane kind of comedy ending. Problems won't be solved, but hey, this is Italy. It's not for giggles that one of the most important figures in our history beat Hannibal by stalling3. However, the real economic problem is becoming more and more pressing: COVID and its attendant measures impact the most on private sector producers, and the smaller are hit the hardest. For how long there will be enough GDP to spend around or act as future security for the debt we are assuming now?
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