15.05.2020

All will not end well

Despite the easing of the lockdown, there will be no quick economic bounce-back, warns Toby Abse

Although the Italian government decided to start ‘phase 2’ (a relaxation of the total lockdown - in stages) on May 4, any idea that the Covid-19 emergency is at an end is absurd. The number of new cases is now definitely increasing at a slower rate, but there is a distinct possibility that the greater amount of mobility, especially on public transport - as more factories are reopened and work on building sites resumes - will push infection rates up again. In the week April 18-25, the death rate was still around 400-500 a day, although by May it was usually below 250.

However, the epidemic is still completely out of control in the largest, most populous and most prosperous region, Lombardy, which includes Milan; the fact that the Milanese infection rate seems to be rising is hardly reassuring. It should be noted that, of the official nationwide total of Covid-19 deaths by May 10 (30,560), roughly half (14,986) had occurred in Lombardy. In other words, there had been more in Lombardy than in all the other 19 regions put together.

Obviously, given Lombardy’s size, large population and openness to international trading contacts, one would expect it to have had more casualties than some of the smaller, more remote, southern regions that are less tied in to the world economy. After all, there is a general correlation between the spread of Covid-19 and a given locality’s links with global capitalism. For example, in Spain, Barcelona and Madrid have been more affected by the virus than many rural areas, and in England, London and Manchester have been particularly badly hit. However, the degree of difference between Lombardy and the rest of Italy is in large measure a direct consequence of the policies that have been pursued by its Lega regional president, Attilio Fontana, and his cabinet member in charge of health, Giulio Gallera.

Whilst they have made dozens of errors over the last two months, chronicled by the Lombard doctors’ professional association, a couple stand out. The first was the decision on March 8 to send patients who were no longer showing symptoms, but were, in many cases, still infectious, into old-age care homes, in order to create more room in the wards of overcrowded hospitals. This has led to hundreds - perhaps thousands - of avoidable deaths amongst the elderly and infirm, who are far more vulnerable to the disease than the general population. The families of these victims have made official complaints and embarked on legal action against the management of the homes, prompting enquiries by a number of Lombard investigating magistrates. Predictably, Fontana and Gallera are trying to dodge responsibility and shift the blame onto the directors of the care homes, but there is clear evidence that the decision was made at a regional level.

The second clear instance of Fontana and Gallera taking a decision that led to hundreds more needless deaths was their refusal in early March to create new ‘red zones’: ie, sealed-off areas subjected to total quarantine, along the lines of the one that had already been set up in the Lombard province of Lodi. If similar drastic action had been taken in key municipalities elsewhere, there would not have been such a colossal death rate that the Italian army had to transfer lorry-loads of coffins to other regions every day for weeks on end (a macabre televised spectacle that will be the most vivid memory of the impact of Covid-19 in the minds of many outside the region).

In this case, the explanation for the behaviour of Fontana and Gallera is not primarily their own undoubted incompetence and lack of serious engagement with the dynamics of the disease, but their obsequious subservience to the local representatives of Confindustria (the Italian equivalent of the Confederation of British Industry). The industrialists of Bergamo and Brescia in particular were implacably opposed to the creation of ‘red zones’ that would have automatically led to the total closure of their factories for an indefinite period.

This is one of the clearest indications that the coronavirus crisis cannot be detached from questions of class and class struggle. Any notion of national unity against the virus in either Italy or the UK is an illusion. For the capitalists, regardless of nationality, profit is always more important than the lives of ordinary people - not only those of frail pensioners no longer in the labour force, but even those of their own workers, who can always be replaced from the ranks of the unemployed. It is no accident that Carlo Bonomi, the ruthless president of the Lombard Confindustria, was elected head of the national organisation by an unexpectedly large majority in a secret ballot in mid-April. He has subsequently criticised the government for soldi a pioggia (‘handouts’ to the poor and unemployed), and has demanded that the government give unconditional grants, not loans, to industry - a statement whose hypocrisy is blindingly obvious.

Responsible

Although a lot more could be said about Lombardy, a focus on the national situation seems more useful in terms of drawing a contrast with the UK.

It is not my contention that Italian prime minister Giuseppe Conte and his health minister, Roberto Speranza, have handled the crisis perfectly, but I would argue that they have adopted a much more considered and responsible approach than Boris Johnson and Matt Hancock. When Speranza was appointed in September 2019, nobody assumed this post would have such importance. Giving the most ‘leftwing’ of Conte’s coalition partners, Liberi e Uguali (LeU - ‘Free and Equal’), its only cabinet minister was probably considered a consolation prize to keep a small social democratic party – necessary for the government’s parliamentary majority - on board. Speranza first pushed for increased health spending in autumn 2019, albeit with limited success. One suspects from press reports of the acrimonious cabinet meeting of April 26 that the ministers from Matteo Renzi’s Italia Viva - the most rightwing force in the coalition - are bitterly regretting that Speranza got this key post and has proved a decisive influence on Conte in slowing down the return to ‘normal’ that Renzi and Confindustria were constantly pushing for.

The whole period of the lockdown has in fact been one in which the class struggle has been played out with some intensity, albeit at one or two removes. It would be wrong to claim that Speranza or the trade union confederations have always got their way, since Conte has often yielded to the demands of Confindustria, even if only to some extent and rather reluctantly. The point is that Conte is not a reliable lieutenant of the capitalist class, but an academic lawyer with some humanitarian instincts as far as ordinary Italians are concerned (although probably not in relation to migrants) and a propensity to listen to serious medical and scientific advice in a way that Donald Trump and Boris Johnson do not.¹ This is why many columnists in the major newspapers Corriere della Sera and La Repubblica devote thousands of words to criticising Conte’s alleged weaknesses as a justification for calling for a government of ‘national unity’ led by a more reliable figure - generally the banker, Mario Draghi, but sometimes others, such as former Vodafone boss Vittorio Colau, whom Conte - reluctantly, one suspects - appointed as head of the committee supposedly in charge of preparing a return to ‘normal’.²

Conte’s problem - indeed Italy’s problem - is that the coronavirus crisis has led to a severe economic crisis. Italy was already in, or very close to, recession in 2019, before Covid-19 hit. The lockdown has greatly aggravated the situation. According to the Italian government’s own draft budget, drawn up on April 23, Italy’s gross domestic product will fall by 8% in 2020 - a more dramatic drop than the one that followed the 2007-08 financial crisis, and the most abrupt since 1945. Italy’s budget deficit will rise from 2.4% to 10.4%. As a result, Italy’s national debt as a proportion of GDP will rise from 135.7% in 2019 to 155% in 2020.

The European Commission has subsequently come up with a set of figures for the fall in Italy’s GDP and the rise in both its budget deficit and national debt that are still more pessimistic. The loss of government revenue due to the Covid-19 crisis is estimated in the draft budget at €26 billion - to put it crudely, far less in terms of both VAT and income tax, at a time when most shops are shut and millions of workers are laid off - or, in the case of the self-employed, are not earning anything. On the other side of the balance sheet, tens of billions are being paid out in unemployment benefit, subsidies to the self-employed and government-guaranteed loans to small businesses (many of which will never be paid back). The latest government plan devised in early May involves the expenditure of €55 billion. The IMF forecasts that Italy’s unemployment rate will reach 12.7% by the end of this year, so this drain on government funds will only get worse.

Whilst the European Union has suspended the so-called Stability Pact (embedded in the Italian constitution by Mario Monti in 2012) and its draconian rules on state aid, there is no guarantee that the ideological commitment to neoliberalism and austerity has gone - particularly if the northern European bloc (Germany, Austria, Netherlands, Finland, Sweden, Denmark) emerges from the Covid-19 crisis in a less battered state than Italy or Spain. Germany, which did not cut expenditure on its health service to the same degree as the southern European countries over the last decade, has had far fewer Covid-19 deaths than Italy, Spain or France, and its government has pumped vast sums into its economy over the last three months: hence its uncharacteristic willingness to endorse the suspension of the EU rules on state aid and balanced budgets.

This gap between northern and southern European countries explains why it would be wrong to see objections to Italy using the European Stability Mechanism (EMS) - even in its new, allegedly ‘unconditional’ form of very low interest loans to help countries badly affected by Covid-19 with their direct or indirect health-related expenditure - as necessarily purely Europhobic or ultra-nationalist, even if the prime motives for the opposition of the Lega and the neo-fascist Fratelli d’Italia (FdI) to the EMS are precisely Europhobic and ultra-nationalist. The fact of the matter is that the wording of the relevant EU treaties does suggest that, once the Covid-19 emergency is over and the rigid rules of the Stability Pact about the size of national debts and national budget deficits are reinstated, the EMS could indeed become a Greek-style noose around Italy’s neck. The European commissioners have tried to reassure Italy about the unconditional nature of the new EMS fund for direct and indirect health expenditure related to Covid-19, but Conte is still having difficulty in persuading M5S to accept such a loan.

The EU ‘summit’ on April 23 - in reality a four-hour video conference - was presented as a triumph for Italy by Conte, whose domestic standing depended on a favourable outcome, given the attacks on him in relation to the EMS from the Lega, the FdI and the more extreme wing of the Movimento Cinque Stelle (M5S - Five Star Movement). Conte’s presentation of his alleged triumph was somewhat misleading. Angela Merkel, as ever, made it clear that there were to be no eurobonds - not even to mutualise the new Covid-19-related debts of the EU27 - as opposed to the existing national debts. There was indeed an agreement in principle on a ‘recovery fund’ linked to the EU budget for 2021-27. However, there is no clarity on whether this fund will give countries grants or loans, and whether any funds will be available to Italy before the end of 2020.

In conclusion, there is little to support the officially endorsed slogan Tutto andrà bene (‘All will be well’), to which most of the Italian population are, very understandably, clinging at this time. Covid-19 is not under control, particularly in Lombardy and Piedmont, and the Italian economy is about to go over a precipice.

1. . There has been a great deal of controversy over granting temporary residency to up to 600,000 people from outside the EU currently illegally or semi-legally employed as either agricultural labourers or carers. Whilst Conte has been less hostile than many of the anti-migrant parliamentarians from M5S, he seems unwilling to let them stay for longer than six months.↩︎

2. . Conte’s televised address to the nation about ‘phase 2’ on the evening of April 26 seemed to ignore much of their advice. Instead he based his plan on a document drawn up by the Istituto Superiore di Sanità (Superior Institute of Health), which pointed out that a total reopening of industry, commerce, schools, churches, restaurants, etc would lead to 150,000 patients needing intensive care by early June. Italy has nothing like this number of appropriate beds - there were only 8,490 by April 30, so Conte’s caution is completely correct.↩︎