03.11.2017
Causing alarm in Rome and Brussels
Toby Abse reports on the bizarre behaviour of Matteo Renzi, which has played into the hands of the right-populist M5S
In a single day (Tuesday October 17) Partito Democratico (PD) leader Matteo Renzi shifted national and, more importantly, international attention away from the Italian budget and away from the Rosatellum1 - the newly passed electoral law - to an even more dangerous topic: the state of Italy’s banking system.
Renzi’s decision to order the PD to vote for a motion attacking Ignazio Visco, the governor of the Bank of Italy - in effect calling for his replacement when his initial six-year term concluded at the end of October - was not only reckless, but also irrational. Whilst parallels could be drawn with Donald Trump’s desire to replace Janet Yellen at the head of the US Fed, Renzi, as a party leader with no ministerial office, does not possess powers analogous to those of an American president in such matters.
In terms of domestic policy, Renzi has gained nothing from antagonising both prime minister Paolo Gentiloni and president Sergio Matarella, both of whom had previously been well-disposed towards him, and shown remarkable tolerance of his earlier abrupt U-turns on matters such as the precise kind of electoral reform the PD should back. It was also unwise to antagonise finance minister Pier Carlo Padoan on the eve of a budget whose passage through parliament without serious delays or upsets is rather crucial to the PD’s election campaign.2 Renzi also managed to provoke conflicts with both former centre-left premier Romano Prodi and former PD president Giorgio Napolitano, both of whom took a very dim view of his anti-Visco motion. In Prodi’s case, Renzi added insult to injury by drawing a contentious analogy between his own criticism of Visco and Prodi’s earlier criticisms of a previous governor, Antonio Fazio, who was removed at the end of his first term in 2005, and whose manifest incompetence led to various major changes in the rules governing the Bank of Italy.
Moreover, it is worth noting that within the PD parliamentary groups, neither Francesco Boccia, the president of the Chamber of Deputies finance committee, nor Massimo Mucchetti, the head of the Senate industry committee, had any enthusiasm for the motion. Lastly, the supporters of justice minister Andrea Orlando - Renzi’s principal challenger in this year’s PD leadership contest - who had very diplomatically played down their differences with Renzi in recent weeks, were outraged by the anti-Visco motion. This became public knowledge when La Repubblica published the highlights of an exchange of messages on WhatsApp of Anna Finocchiaro, the minister for relations with parliament, in the minutes before the vote.3
Whilst both an M5S motion and a Lega Nord motion attacking Visco and the Bank of Italy had been expected (and both of these opposition motions were predictably defeated in the Chamber of Deputies), Gentiloni, Mattarella and Padoan had no inkling that the PD would - under pressure from Renzi and his close associates - follow suit and table its own motion attacking the bank. All were united in wanting to renew Visco’s appointment for a second six-year term, and did not envisage any serious objection to this course of action coming from what they regarded as their own side.
Moreover, the appointment of the governor is not supposed to involve parliament. The theory is that the bank’s board recommends a name (or names), the prime minister considers its suggestion - whilst retaining the right of veto and the possibility of an alternative, external nomination - and the president of the republic in normal circumstances issues a decree confirming the PM’s nomination. In the case of Visco, it ought to be pointed out that his reappointment also had the vigorous endorsement of Mario Draghi, the current head of the European Central Bank, and Visco’s immediate predecessor as governor of the Bank of Italy (Draghi had been the man behind Visco’s original appointment).
In short, Renzi’s attack on Visco was no purely domestic matter, as the provincially-minded Renzi, with his notoriously risible English and close-knit entourage, may well have imagined; it may well weaken Italy’s credibility within the euro zone - undermining Draghi’s efforts to ‘defend his country’ from figures like German finance minister Wolfgang Schaüble - and subject it to serious attacks on the financial markets reminiscent of those Italy endured in 2011, when the gap between the interest rate on German and Italian government bonds soared.4 Given the weaknesses of Italy’s banking system - 10 banks have collapsed since November 2015 - more frequently discussed abroad than at home, attacking Visco in the run-up to a general election, whose outcome is very uncertain, was an incredibly reckless move.
Whilst any uncertainty always concerns the markets - as we can see from the responses to the Brexit negotiations - the Italian election is causing particular anxiety because of worries about a possible Europhobic, populist M5S government.5 The return of a centre-right government associated with Silvio Berlusconi would not be particularly reassuring either,6 especially given the participation of the Europhobic populists of the Lega Nord. (The latter’s aspirations to the autonomy of the Veneto region have caused less well-informed foreign observers, such as Guardian columnist Paul Mason, to draw overblown comparisons with the conflict between the Catalan regional government and the Spanish state.)
Paolo Gentiloni’s premiership was supposed to reassure the European Central Bank and the core EU nations that the PD is the best barrier against Europhobic populism in Italy, but Renzi’s recent antics could put this at risk.
Motives
Renzi’s true motives bear no relation to his demagogic rhetoric, and it is probably far too kind to assume, as some mainstream commentators do, that this is merely an attempt to outbid M5S in banker-bashing in view of the imminent general election (widely expected to take place in March 2018).
In theory of course, we would not take issue with Renzi’s statement that “A party of the left stands with the savers, not with the bankers.”7 And, of course, the record of the Bank of Italy in terms of vigilance in relation to the various banks that have collapsed in the last few years is hardly beyond reproach - if it had intervened earlier and more vigorously, many small investors probably would not have lost their life-savings. However, it is hard to take such criticisms seriously when they come from a man who, even when he was just a local politician in the Florence area, had already formed a deep and lasting friendship with a banker as crooked as Denis Berdini.
Moreover, in January 2016 Renzi claimed on television that Italy’s third bank, Monte dei Paschi di Siena (MPS), was “a good investment” for the small saver. On that day an MPS share was worth €75, a year later, on the last day before trading was suspended, it was down to €15 and today, despite an enormous increase in the bank’s capital, it is probably worth a fraction of this - on October 20, when trading was allowed to resume, it had a theoretical value of €4.28. In other words, any trusting small saver who followed the advice of Renzi when he had all the authority of a sitting prime minister would have lost almost all their capital.8
Bad as Renzi’s record is in relation to MPS, it is concern about another Tuscan financial institution - the Banca Etruria - that probably accounts for his lashing out at Visco. This is the bank whose vice-president, at the moment it was forced into receivership, was Pierluigi Boschi, the father of Maria Elena Boschi. At the moment of the bank’s collapse, Maria Elena was not only Renzi’s closest political associate, but a full member of his cabinet as minister for reforms. It has been widely suggested that this involved a conflict of interests, as she was attending cabinet meetings during Renzi’s premiership when matters affecting banks - particularly her father’s collapsing bank - were being discussed and legislation was being proposed.
Whilst Boschi senior has so far escaped any criminal proceedings, he has been fined considerable sums for serious and blatant breaches of banking rules. It is doubtless mere coincidence that Renzi had, as a paid consultant in his prime ministerial office for many months, none other than Roberto Rossi, the procuratore (chief prosecutor) of Arezzo, who was investigating wrongdoing at the Banca Etruria, and who ultimately concluded that Pierluigi Boschi, unlike some of his colleagues, had no criminal case to answer.
When Paolo Gentiloni became premier, Renzi put enormous pressure on him to appoint Maria Elena Boschi as his undersecretary. In this role, she is meant to display primary loyalty to the current prime minister (Gentiloni), not the previous one (Renzi). Disgracefully, Maria Elena not only knew of the anti-Visco motion in advance, and withheld this information from Gentiloni, but she actually played a key role in drafting it. This treachery initially created serious problems for Gentiloni in relation to both Matarella and Padoan, who angrily but wrongly assumed that the premier had been kept informed of the PD’s plans and hidden them from the president and his own finance minister.
Although Gentiloni has been forced to declare his full confidence in Boschi (and, according to press reports, managed to work with her on the budget late into the night, without giving any sign of the anger he undoubtedly feels) and Renzi has publicly denied his own leading role in the whole affair, it is hardly surprising that the prime minister’s relationship with his party leader has soured.
The shameless Boschi saw no objection to her attending the cabinet meeting that would discuss whether or not Visco’s appointment would go ahead, but on October 27 she claimed that influenza prevented her attending. It was also noteworthy that three other pro-Renzi ministers (Luca Lotti, Graziano Delrio and Maurizio Martina) also claimed that either illness or previous engagements prevented them attending the cabinet meeting that finalised Visco’s appointment.
The behaviour of the whole shady cabal surrounding Renzi - the so-called Giglio Magico (Magic Lily) - has played straight into the hands of M5S and done the PD no good whatsoever. Predictably, M5S candidate for premier Luigi di Maio has challenged Boschi to debate with him in the presence of the defrauded small savers in front of the headquarters of the Banca Etruria in Arezzo.
Notes
1. This law is named after Ettore Rosato, the PD parliamentarian in whose name it was moved, although in reality it was the outcome of secret negotiations between Renzi and other party leaders. Seats will be divided into roughly one-third ‘first past the post’, electing a single member; and two-thirds small, multi-member constituencies elected by proportional representation. It is undoubtedly designed to penalise Beppe Grillo’s Movimento 5 Stelle (M5S - Five Star Movement). The bill was finally passed on October 26, with 214 in favour, 61 against and 22 abstentions.
2. This is not just because prolonged discussion would enable the PD’s left critics in the Movimento Progressista e Democratico (MDP) and Sinistra Italiana(SI) to attack its neoliberal economic policy, but also because a failure to pass the budget within a reasonable time limit (ie, before Christmas) could revive suspicions about Italy’s financial stability on the part of the Germans, the Dutch and other northern European advocates of austerity within the euro zone.
3. Finocchiaro did her best to persuade deputies that she had managed to water down the motion, and that in this revised form it was no longer as offensive as the original draft.
4. It was probably no coincidence that on the very day of Renzi’s offensive against Visco, Moody’s credit rating agency issued a warning about Italian banks and their holdings of non-performing loans (NPL). Moody’s claimed Italy had €349 billion in NPL at the end of 2016 - 17.3% of all Italian bank loans - compared with the European average of 5.1%.
5. The German, Austrian and Czech election results have revived fears about a populist wave that had been partially quelled by the victories of Rutter in the Netherlands and Macron in France. It is, of course, no accident that the Financial Times has covered M5S in far greater detail than The Guardian.
6. Berlusconi’s claims that he could restrain the desire of his much younger Lega Nord ally, Matteo Salvini, to ditch the euro, or radically alter European treaties, seems to have been treated with some scepticism within the European Union. The opinion polls for the Sicilian regional elections, in which a Berlusconi-endorsed neo-fascist is narrowly ahead of the M5S candidate, are hardly likely to reassure Angela Merkel or Emanuel Macron either.
7. La Repubblica October 20.
8. MPS was very clearly on a downward trajectory long before January 2016, so it is unlikely that Renzi, who has always had well-informed contacts in business circles, especially those in Tuscany, was giving his advice in good faith.