The Italian word for “stormy” is burrascoso. It is a word that foreigners who live in Italy soon learn, if they have any linguistic skill at all, since the outlook for the economy, politics, society, or relations with Europe is invariably one where dark clouds loom on all fronts.
For 40 years now, since the mid-1970s, Italy has indeed been weathering a continuing series of political storms. On at least two occasions, in 1992-1993 and 2011-2012, the country teetered on the brink of a systemic crisis of Greek or Argentine dimensions. In the meantime, the absence of coherent political leadership has ensured the erosion of the country’s standing in the world.
Italy’s perennial political instability has often led analysts in the Anglosphere to underestimate its importance—there are few nations whose politics is so routinely discussed in stereotypes. We should, however, remember that Italy is still one of the 10 biggest economies in the world and that after the United States, Japan, Germany and China, it has the world’s largest public debt. It has a strategic position at the heart of the Mediterranean and hence a crucial role in the ongoing migration and Libyan crises. Historically, Italy has also had better relations than most European countries with Russia and is disgruntled with the West’s current attitude toward the Kremlin. We should also remember that the most important link in any chain is by definition the weakest one. By that standard, Italy has some claim to be regarded as the most important country in Western Europe right now.
The Politics of Bedlam
Italy’s principal problem is its politics. Most of its Cold War-era political class was swept away by corruption scandals in the early 1990s. It was substituted by a litigious center-left that has never coalesced into a coherent whole, and a populist right-wing alliance led by the Ur-Donald Trump, Silvio Berlusconi. To the excitement of some political scientists, these coalitions have alternated regularly in power, but neither has succeeded in providing stable government. The divisive personality and political style of Berlusconi did not help. For most of the period between his decision to enter politics in 1994 and his removal from office in 2011, Italy’s political elites were obsessed with his alleged—and real—criminal acts and sexual misconduct. With the exception of former U.S. President Bill Clinton during his second term in office, it is hard to think of another case in a major democratic country where the private life of a political figure absorbed so much of the time and energy of lawmakers.
The most important link in any chain is by definition the weakest one. By that standard, Italy has some claim as the most important country in Western Europe right now.
Berlusconi was replaced by a government of technocrats headed by a former European commissioner, Mario Monti, in November 2011. It was the third time since 1992 that a government of elected officials had been suspended. Berlusconi, indeed, has since talked of a coup d’état having been organized against him by Europe’s powers that be. Conspiracy theories are a dime a dozen in Italy, but in this case there is little doubt that Berlusconi’s downfall was partly attributable to pressure from other European leaders, who feared a financial meltdown if a more credible government was not installed. Italy had a significant portion of its debt stock coming due in the first months of 2012, and bond buyers might have shied away from new offerings if Berlusconi had stayed in office.
Monti, a tenacious, uncharismatic figure, was duly vaunted by the international press as a potential savior not only of Italy, but also of the beleaguered eurozone. The plaudits were excessive. Monti was long on gravitas but short on political nous and lasted little more than a year. After elections in the spring of 2013, government by professors and civil servants yielded to a coalition composed of the Democratic Party and the New Center-Right (NCD), a breakaway from Berlusconi’s Forza Italia. The new government was headed by Enrico Letta, an accomplished policy wonk, but he was soon edged out by the rising star of the Democratic Party, Matteo Renzi, then the mayor of Florence.
Renzi formed a government in February 2014 and has been in office ever since. His administration heralded itself as “un governo del fare”—a can-do government—one that would undertake sweeping reforms. On the whole, it should be given credit for trying to live up to this billing. However, with the exception of a law liberalizing the labor market—the so-called Jobs Act—as well as a controversial law introducing civil unions and an equally contested new electoral law, its concrete achievements have been sparse. The government’s future depends on the success or failure of its signature reform to the constitution, which will be put to the electorate in the fall of 2016. Renzi has said he will “go back home” if the voters reject the proposed amendments to the constitution. What would happen in that event is a known unknown. We know there would be a major political crisis, but only a fool would try to predict its outcome.
What are the goals of the constitutional reform, and why has Renzi staked his political career on obtaining them?
Italy’s existing constitution has been tinkered with remarkably little since 1948, when it came into force. It was written by the anti-fascist parties that emerged from World War II, and embodies a delicately worded compromise on both the values that should underpin the state and the institutions through which society is governed. Broadly speaking, the fundamental values of the constitution are liberal, in the American sense of the word, with strong guarantees of social protection and political pluralism. The progressive language of the constitution marked a decisive rupture from the country’s fascist past and also undoubtedly helped the Christian Democrats and the Communist Party to find a modus vivendi in the postwar period. Renzi’s minister for constitutional reform, Maria Elena Boschi, a Tuscan lawyer, has sensibly left the fundamental values of the constitution unchanged.
The country’s institutional structure, by contrast, has been interminably debated since the mid-1980s. Many constitutionalists and political scientists have contended that the 1948 constitution gives too much power to the legislature and to the central organs of the state. Italy, like the United States, has a legislature in which both chambers—the Chamber of Deputies and the Senate—must approve all legislation; any government must also enjoy both chambers’ confidence. Such “perfect bicameralism” has proved a recipe for gridlock in the highly fragmented and ideologically polarized Italian party system. Italy, which despite its small size is a very diverse country where individual cities and regions have a powerful sense of local identity, seems a natural candidate for federalism. But despite an expensive experiment in regional government since the 1970s, and limited constitutional reform giving the regions greater powers in 2001, it has basically remained a centralized state.
The government’s future depends on the success or failure of its signature reform to the constitution, which will be put to the electorate in the fall of 2016.
Boschi’s reform bill addresses these two perceived shortcomings head on. The government will need only to have a majority in the Chamber of Deputies in order to command the confidence of parliament, and much legislation, including the budget, will require approval from the chamber alone. In parallel, a new electoral law, not part of the constitutional reform, grants the party that wins the most votes in an election a bonus in seats to ensure that it controls 55 percent of the Chamber of Deputies. The size of the Senate, meanwhile, will shrink from over 300 to just 100. Senators, whom Boschi originally intended to be elected indirectly by the regional assemblies, will in fact be directly elected, though how this will be done is still to be determined. The reform also implies a minor change in the way the president of the republic is elected, and would limit the president’s power.
These proposed modifications have brought out the worst in the theatrical tradition in Italian politics: The more hysterical of Renzi’s critics have called the new arrangements a form of “dictatorship of the majority.” To non-Italians, such criticisms can seem overblown, since the premier under the new constitutional arrangements will unquestionably have less power to force legislation through than the prime ministers of Britain, Spain or Germany, let alone the president of France. But then, outsiders do not share Italy’s hostility to concentrated authority, which is the legacy of the experience of fascist rule. Renzi has moreover split his own party, since those on the left wing of the Democratic Party, who are mostly former communists or socialists, are attached to the 1948 constitution’s consensual bias.
There is also a generational clash. Renzi is in his early 40s; Boschi is 35; most of the politicians, academics and jurists who are backing the reforms are under 50. The critics, both in parliament and academe, mostly come from an older generation. Renzi has boasted that his goal is to “rottamare,” or scrap, the generations that got Italy into its present mess. Above all, Renzi shows no deference to his elders—a mortal sin in Italy, whose culture resembles that of Japan in this regard. Yet he is actually not untypical of his age group. In all walks of professional life, Italians born since approximately 1970 are in open rebellion against the baby boomers. The older generation, for its part, cannot hide its resentment that a young minister like Boschi, who seemed like an innocent-at-large when she took office, has proved to be at least their equal in the dark arts of parliamentary backroom dealing.
The coming referendum on the constitution will hence be freighted with significance. There is no certainty that it will pass. Renzi will have part of his own party rowing against him; voters already rejected a fundamentally similar reform proposed by Berlusconi in 2006; and the older generations will vote, while the young may not, although it is also true that across the country “Committees for a Yes” are springing up, and their activists are mostly young or early middle-aged.
If the referendum were not to pass, and if Renzi were to resign, the fun and games would begin. The new electoral law only applies to the Chamber of Deputies, so a snap election would mean the Chamber and the Senate being selected by different electoral systems, which would certainly lead to stalemate. This is because the party system is divided into three warring tribes, each of which commands roughly 30 percent of the electorate. Moreover, all of these tribes are bitterly divided within themselves.
On the left, Renzi’s Democratic Party is flanked by Sinistra Italiana—the Italian Left—a grouping of radicals along the lines of Greece’s governing Syriza coalition. They might be defined as the idealistic left, if it were not for the fact that their main policy would appear to be opposing Renzi, whom they detest. The chief policy stance of a large section of the Democratic Party itself is undermining Renzi. Supporters of former leader Pierluigi Bersani, not to mention those close to Enrico Letta, are waging an internal war against the premier. In part, their opposition is principled: Many members of the Democratic Party disagree with Renzi’s policy priorities. Liberalizing the labor market, for instance, was una decisione sofferta, a painful choice, as Italians say. But personal antipathy plays a part, as does the suspicion that Renzi is really a Christian Democrat at heart, who would prefer to govern from the center in the company of the NCD and various other opportunists who have transformed themselves from being supporters of Berlusconi to being keen enthusiasts for Renzi.
The situation on the right is even more convoluted. Since 1994, the dominant party on the Italian right has been Berlusconi’s Forza Italia, which was for a while named the Partito della Liberta, or Freedom Party. Berlusconi is no longer the force he once was. He is now 80, recovering from serious heart problems, and a convicted criminal. His television networks are in decline, while his football team, AC Milan, has ceased to be one of the glamour teams of Europe, or even Italy. Forza Italia has accordingly lost considerable ground. The days in which a third of the electorate voted for it are gone; Berlusconi will be lucky to exceed 10 percent in an election.
If the referendum were not to pass, and if Renzi were to resign, the fun and games would begin.
Berlusconi has been overtaken by his former junior partner, the Lega Nord, or Northern League. The party seemed doomed to irrelevance as recently as 2013 but has been reborn under the leadership of Matteo Salvini, who is also in his early 40s and has opted to scrap the party’s old guard. Salvini has guided the Northern League to a steady 12 to 15 percent approval in the opinion polls, finding a ready audience with his campaigns against the Roma, which amount to bulldozing their encampments; against the euro, which he calls “genocidal”; and against multicultural society—he has called for an end to immigration and “no more mosques.” But his extremism puts off centrists. The NCD, for instance, wants nothing to do with him, and hence has chosen to remain allied with Renzi rather than return to the right-wing fold. In Catholic Italy, where the values of social solidarity run deep, and where Pope Francis’ teachings are an inspiration, there is a ceiling on how many people will heed the Northern League’s message—the party has probably already peaked. Certainly, unlike Marine Le Pen’s Front National in France, it has no hope of becoming a mainstream political party.
The third and most idiosyncratic element of the Italian party system is not a party at all, but a so-called movement: the Movimento Cinque Stelle or 5-Star Movement (M5S), a political force that defies easy categorization. Founded by the comedian Beppe Grillo, who has been the scourge of the political class since the 1980s, the M5S is perhaps best described as a sect. It requires its parliamentarians to give part of their earnings from politics to a fund to support small businesses; demands absolute adherence to the party line, which is decided by online votes of the movement’s activists; and expels anybody who deviates. In the first three years of the legislature elected in February 2013, nearly 40 M5S deputies or senators have been forced out for political disagreements, or because they broke the movement’s rigid code of conduct for elected officials.
June 20, 2016 (AP Photo by Fabio Frustaci).
The M5S is not a bunch of amateurs playing at politics. It was long guided from behind the scenes by a new-media guru, Roberto Casaleggio, in whose judgment Grillo placed enormous store. Casaleggio died this spring. His lessons live on, however; M5S candidates are personable, on message and sometimes unscrupulous in their tactics. While in theory open to parliamentary cooperation with the Democratic Party, in any given case the M5S is always careful to ask for a fraction more than the government can politically concede. This has enabled them to avoid horse-trading in parliament and maintain an air of purity, although many of their activists are now asking why the movement has been so ineffectual.
Whether the M5S would stay pure if it ever obtained power is less certain. The movement has so far administered only one major Italian city, Parma, for any length of time. Not by chance, the relationship between the mayor of that town and the movement’s hierarchy has frequently been fraught. He is in government and hence has to make compromises. In June, the M5S’s candidate, 37-year-old lawyer Virginia Raggi, was elected mayor of Rome. The eternal city has many of the same problems as 1980s New York: It is an Augean stable of corruption, inefficient and overstaffed public services, crippling debt and diffuse street crime. Rome will be a real test of whether citizen politicians can succeed where the professionals have conspicuously failed.
The 5-Star Movement is not a bunch of amateurs playing at politics.
Raggi’s victory, which was matched in Turin by another M5S candidate, Chiara Appendino, has also opened up the possibility that the movement might become the largest party and hence be entitled to the majority prize envisaged by the new electoral law. This development has thrown the Democratic Party into panic. The odds are that the electoral law will be amended before it is ever used, but will likely become more proportional, and hence less apt to produce a government able to make hard choices.
In the fall of 2016, Italy must navigate a contentious reform of its constitutional arrangements with a divided party of government, a fragmented and demagogic opposition, and a second opposition whose sectarian attitudes seem incompatible with the norms of representative government. None of these political forces commands a clear plurality of the electorate, let alone a majority.
Shrinking the Slag Heap
If Italy were Canada—rich, safe and relatively debt-free—its politics would be a matter of purely domestic concern. As it is, Italy’s political struggles concern its neighbors a good deal. This is because they worry that Italy’s malfunctioning democracy could drag them into a vortex if it fails to deal with the country’s structural economic problems.
At the heart of Italy’s neighbors’ concerns is the national debt, which at €2.3 trillion represents 133 percent of GDP. It is usual to refer to a debt mountain, but a more appropriate metaphor is a slag heap. That is to say, it is an artificial mound that can be shrunk by human action in a way that a mountain cannot. Nations can reduce their debt ratio by adopting supply-side policies that boost growth of GDP; cutting government spending; fighting tax evasion and hiking taxes on those who can afford it; leaching the slag heap away through inflation; or jump-starting the economy with public spending on infrastructure and other measures designed to raise long-term competitiveness.
Italy, like all members of the eurozone, is under pressure from Brussels to implement the first three of these options. The fourth is being looked after by the European Central Bank (ECB), whose quantitative easing program is designed to introduce a judicious dose of inflation into the price-stagnant EU. The fifth is a bone of contention. Italy would like to spend more, and needs to: Its public infrastructure, which seemed futuristic back in the 1980s, is dropping to bits.
Contrary to the received wisdom in Northern Europe, where many people fain to believe that Italians are spendthrifts, Italy has been running a primary surplus—a surplus not counting interest payments on its debt—on its budget for most of the period since it joined the euro. Italy is among the EU’s virtuous citizens in spending terms: Its 2016 deficit, including interest payments, will be just 2.3 percent of GDP, below the 3 percent limit agreed to under the EU’s Stability and Growth Pact. Unlike France, Spain, Portugal or a non-eurozone country like Britain, Italy has kept its public finances in almost Germanic order. And it has done so, contrary to stereotype, by collecting more taxes. The Italian state currently collects 43.5 percent of national income, a number higher than is the case in some other big European economies.
Before we applaud this unsuspected penchant for austerity, we should indicate several caveats. The first is that this prolonged fiscal crunch has had a severe cost in terms of growth. Italy’s economy has stagnated since the introduction of the euro in 2002, contracted by over 5 percentage points following the global financial crisis in 2007, and has endured two additional recessions since then. Its economy is still smaller than in 2008, and living standards are lower than when Italy entered the euro.
Italy’s neighbors worry that its malfunctioning democracy could drag them into a vortex.
Second, Italian governments have been better at raising taxes than at cutting spending. The Italian state absorbs 50.5 percent of the nation’s output—significantly higher than a decade ago. This is less than the Scandinavian countries or France, but in those countries citizens at least get value for money. Italy’s weak governments—and the Renzi government is no different in this regard—have abjectly failed to cut waste, let alone slim down the state.
Third, while Italians, contrary to myth, do pay lots of taxes, the payment burden is skewed. The north pays more than the south, while middle class employees and pensioners are taxed until the pips squeak. Too many Italians—either because they are not working, or earn too little, or evade—pay no taxes at all, which means a heavy burden falls on those who do.
Fourth, Italy’s fiscal prudence owes much to the outside constraint of the EU’s Stability and Growth Pact. In a political system like Italy’s, the pressure to spend public money is enormous—it is the most expedient way of winning votes. Absent European monitoring, Italy’s finances, if not its productive capacity, would in all likelihood closely resemble those of Greece.
As it is, the government, showing an unusual readiness to be blunt with Brussels, has persuaded the European Commission to show flexibility, which is Rome’s euphemism for running a higher budget deficit than EU guidelines strictly foresee. In May 2016, the EC, as part of the Fiscal Compact, gave Italy a green light to run a 2017 deficit of 1.8 percent of GDP, falling to under 1 percent only in 2018. This was a significant relaxation of the rules, introduced to allow small tax reductions, rather than higher spending, which caused disquiet among Europe’s fiscal hawks. Italian Finance Minister Pier Carlo Padoan promptly reassured his peers that Italy would not deviate from the spending trajectory laid down by the commission. But his words, of course, are not traced in blood, and if one adds up the spending promises Renzi has made, they had better not be. If there is upheaval after the referendum vote, the willingness to sustain restraint on public expenditure will in all likelihood disappear. For some strange reason, public spending always spikes in election years.
So, although Italy is often the object of crass stereotyping by northern Europeans, who underestimate the extent and duration of the sacrifices it has made, pressure for an end to austerity is building up. In the absence of an unexpected surge in global economic growth, Italy’s debt problems seem unlikely to diminish.
At worst, the slag heap of debt could grow. Italy’s budget problems would be compounded if the ECB terminated or reduced quantitative easing, which has driven down interest rates on sovereign bonds significantly and made the costs of maintaining the national debt more bearable. Some of Italy’s biggest banks have more bad debts on their books than is good for them, and may need a public bailout, which may or may not be possible under EU law. The yield on a 10-year government bond is currently about 1.5 percent. If bond yields doubled, they would still be low by historical standards, but Italy would be compelled to retrench drastically on public spending. The truth is that Italy cannot afford a state that costs €835 billion a year to run. But the first politician to tell the Italians this uncomfortable fact, which implies that Italy has slipped from first-rank status among European nations, will die a horrible electoral death.
Brawling With Brussels
Public finances are not the only cause of tense relations between Rome and Brussels. In January 2016, Renzi replaced Italy’s career-diplomat ambassador to the EU with Carlo Calenda, an astute operator close to former premier Mario Monti. The switch reflected Renzi’s conviction that Italy needs to propagate its vision of European integration more forcefully.
We can best understand Italy’s general approach to European integration and NATO by applying Arnold Wolfers’ distinction between “milieu goals” and “possession goals.” Milieu goals are, as the name suggests, policies that aim to construct a secure and beneficial environment for a given nation; possession goals are objectives that give immediate returns. Italy, unlike the United Kingdom, has always privileged the former in its European policy, even when this meant making deals that led to severe domestic problems—its acceptance in the Treaty on European Union of tough fiscal policy rules and central bank independence were examples of this. Its leaders saw participating in a Western Europe that was moving toward political unity as a goal of overwhelming importance that was worth making large sacrifices for.
Minister Mark Rutte during an EU summit, Brussels, Dec. 17, 2015 (AP photo by Geert Vanden Wijngaert).
In institutional terms, the document argued for the completion of the banking union, which would “Europeanize” the problem of bailing out banks—the ones most in trouble are Italian; for the gradual transformation of the European Stability Mechanism (ESM) into a full-blown “European Monetary Fund”; and for the appointment of a “European finance minister” to run a “common fiscal policy and to ensure that a coherent and internally balanced fiscal stance is pursued at aggregate level.” This would mean giving the EU an “adequate budget” able to finance a “common unemployment benefit,” among other things. It is hard not to conclude, to use non-academic language, that Italy was deliberately yanking Germany’s chain. Italy’s document was, in effect, an outline of the “transfer union” that haunts Germany’s dreams. But it is also indicative of the priorities Italy believes Europe should adopt.
Italy’s frustration with the EU is not limited to its antipathy to what it considers the cautious, vision-free “Europe of rules” imposed by Berlin. Rome has been showing exasperation with the EU on a range of important issues. Italy is for instance chafing at the continuation of Western sanctions on Russia, whose retaliatory measures against European nations are hitting its luxury goods exporters particularly hard—it has been estimated that Italian firms have so far foregone €3.6 billion in sales. When EU foreign ministers discussed the issue of relations with Russia in their March 2016 meeting, Italy and Hungary were the two countries most outspoken in urging a change of policy, although Italy fell in line with the majority opinion when sanctions were recently renewed through the end of 2017. The milieu goal of preserving a collective European stance on Russia’s aggressive behavior against Ukraine for the moment seemingly still outweighs the possession goal of selling more Chianti wine and Prada outfits. Still, Russia is resource-poor Italy’s largest supplier of energy and clearly occupies a special place in Italy’s diplomacy. Foreign Minister Paolo Gentiloni has made three high-profile visits to Moscow since he became foreign minister in October 2014. Speaking in April on the occasion of a visit to Rome of Russian Deputy Premier Arkady Dvorkovich, Gentiloni subtly argued that while Italy would not break European solidarity on sanctions, it had “never closed the door to dialogue” and had no intention of allowing its commitments to its allies to be transformed into the “shutting out” of “Europe’s most important neighbor.” Renzi led the Italian delegation to the St. Petersburg Economic Forum in June.
Italy is also upset, correctly so, by what it sees as a lack of European solidarity over the question of refugees from North Africa. Until Syrian refugees began pouring into Greece, Italy had been bearing the brunt of the migration crisis. Hundreds of thousands of Africans seeking a better life in Europe have poured into the continent via Italy since 2012, although an estimated 30,000 have drowned or been killed by human traffickers. Since then, the Italian navy and coast guard have been working round the clock to save lives; the tiny island of Lampedusa alone has hosted more migrants than most of the rest of Europe. In October 2014, Italy’s Mare Nostrum Operation, which the government established in 2013 to tackle rising migratory flows, was replaced by Operation Triton, under the authority of Frontex, the EU’s border agency. Although the Frontex operation at least gave Italy some financial relief, the bulk of rescue operations continue to be carried out by Italian vessels, and other EU states have been distinctly reluctant to accept refugees on to their soil.
Freedom of movement was apparently a fundamental pillar of the European project, at least insofar as it concerned prosperous Europeans pursuing their careers. But it is an Italian—and Greek—problem when it comes to Africa’s huddled masses. Italy’s solution has been to argue for Europeanization of the external border and for a migration compact: a package of measures encompassing a “fair grand bargain” whereby targeted EU aid would be extended to African nations in return for cooperation on reducing the migrant flow.
To set Europe’s agenda, or more of it, Italy will need time, domestic stability and a diminishing national debt.
The migration question leads to the wider issue of Libya, and Italy’s foreign policy toward the Arab world, which deserves a report to itself and therefore will not be discussed in detail here. Suffice it to say that Italy, Libya’s ex-colonial power, is supporting, along with the rest of the international community, the government of Prime Minister Fayez al Sarraj as the best hope of restoring some semblance of order to the country. Politicians in Rome are extremely wary, however, about making a military commitment akin to that of 2011, when Italy participated in the international community’s humanitarian intervention despite the then-Berlusconi government’s close ties with former Libyan leader Moammar Gadhafi. A year ago, several of Renzi’s ministers seemed willing to commit ground troops to Libya; wiser—or more prudent—counsels have prevailed. At the same time, Italy has real expertise in Libya, and its energy company ENI is the country’s biggest foreign investor. Italy is bound to be intricately involved in any international initiative to bring stability to Libya, and, indeed, on May 15, Gentiloni jointly presided, alongside U.S. Secretary of State John Kerry, over the international conference held in Vienna to discuss Libya’s future.
Italy today is a country whose importance for the foreign affairs of Europe and the Mediterranean is in the ascendancy. Without raising their voices, both Finance Minister Padoan and Foreign Minister Gentiloni have mounted a principled and tenacious critique of the EU across a broad range of issues.
Yet to set Europe’s agenda, or more of it, Italy will need time, domestic stability and a diminishing national debt. In April, Maria Elena Boschi wrote an op-ed for British newspaper The Independent, in which she boasted that “the Italian position in Europe has changed from [being] the source of problems to the provider of their answers.” Boschi was reflecting the facile optimism, which sometimes spills over into arrogance, at the heart of the Renzi project. His young Turks really do think that their hard work and brains will succeed where two generations of old men have failed. Veteran Italy watchers are more likely to note that the political storm clouds are again darkening ominously.
Mark Gilbert is a resident professor of international history at Johns Hopkins University-SAIS Europe, based in Bologna.