13.06.2012
Turmoil threatens
While Italy teeters on the brink of a new crisis, the left is nowhere. Toby Abse reports on the machinations of the main parties
The long predicted ‘contagion’ seems to be spreading throughout the southern periphery of the euro zone, not least to Italy.
Last week the spread on its 10-year bonds jumped from 433 on Thursday to 442 on Friday, before soaring to 473 at the close of trading on Monday June 11. Whilst the final Tuesday figure was only slightly more - 475 - it had been 490 at one point during the day and the narrowing of the gap was due to an unusual loss of value of German bonds (perhaps because of transatlantic scepticism about the fate of the euro zone) rather than a gain in value for Italian ones. At the closing of trading on Monday the interest rate on these Italian bonds was back up to 6.03% and by Tuesday it rose further to 6.16%. These levels have not been seen since January and are once again moving towards 7%, the level universally believed to be unsustainable, triggering bailouts elsewhere.
The major American daily newspapers seem to think that the Monti administration has run out of steam. The Wall Street Journal drew attention to the fact that Italy is in recession and suggested that the ‘reform package’ could be “too much even for Mario Monti” (June 11), whilst the New York Times asked: “Will Italy be the next to fall?” and expressed the view that too many reforms were stuck in parliament (June 11).
It is indeed the case that the infamous labour market ‘reform’ - that in practice abolishes the protection offered to workers by article 18 of the 1970 workers’ statute, despite some minor modifications belatedly introduced by the Partito Democratico (PD) in order to buy off the CGIL union leadership - has still only passed the Senate and awaits the ratification of the Chamber of Deputies, without which it cannot become law. Silvio Berlusconi’s continuing attempts to turn a new draft anti-corruption law into something close to a made-to-measure amnesty for his own misdemeanours probably does not help Italy’s image in the US - foreign firms would prefer a less corrupt business environment (to avoid additional costs, in terms of illicit commissions for politicians and the like, rather than because of any concern with financial morality).
American papers on June 12 were no kinder to Italy than the previous day’s editions - the Wall Street Journal said that Monti’s honeymoon was over, whilst the New York Times dwelt on the risk of contagion spreading from Spain to Italy. The international cult of ‘Super Mario’ in the mainstream neoliberal media that marked the immediate aftermath of Berlusconi’s enforced resignation in November 2011 has lost any real purchase.
The negative international responses to Italy’s crisis have not been confined to the US - June 12 saw a statement by the Austrian finance minister, Maria Fekter, claiming that Italy would soon be seeking a bailout. While she subsequently retracted this in response to outrage by Italian ministers and mainstream press claims that it was “a gaffe” by somebody notorious for such errors, it may in reality be an indication of thinking amongst the more hard-line northern Europeans - Monti had a very unsatisfactory telephone conversation with Angela Merkel on the same day, getting nowhere in his efforts to suggest that a greater emphasis on growth was required to save the euro zone.
If a speculative attack on Italy has really started, this could be an appalling week. A €6.5 million auction of Italian one-year bonds was due to take place on June 13, followed by a €4.5 million auction of 10-year bonds the next day and a third auction of €9.5 billion worth of other bonds on June 15. By noon on June 13, the interest rate on the 6.5 billion annual bonds had reached 3.972%, compared with only 2.34% in May, returning to the worst levels of December 2011. There was also a fall in demand for the bonds - 1.73 billion compared with 1.79 billion at the last auction in May.
The Milan stock exchange fell by 2.79% on yet another Black Monday and continued to fall - by another 0.70% - on Tuesday June 12, when every other European stock exchange made minor gains. By noon on Wednesday the Milanese index was down a further 0.5%, so the downward trend seemed to be continuing. Whilst Monday was a bad day for most Italian shares, the most spectacular falls were, very significantly, in those of Italian banks, suggesting that fears of a Spanish scenario of bank failure might be taking hold. Monday’s closing figure on the Milan bourse of 13,070 points was very close to the lowest it has reached during the last eight years - in March 2009 after the collapse of Lehman Brothers.
There are some objective factors that may give a partial explanation for the apparent panic. Italian GDP is down 0.8% compared with the previous three month period, and down 1.4% compared with the same period of 2011. A decreasing GDP inevitably means a decrease in revenues from taxation and in the first three months of this year the yield from VAT has gone down 25.8%, despite all the dramatic raids on tax-dodging restaurants and bars by the Guardie di Finanza (finance police) that was such a marked feature of the early months of the Monti administration. Italy’s contribution to the Spanish bank bailout, at 19.8% of the total, will be no small sum of additional government expenditure, even if it its precise dimensions in monetary terms are yet to be clarified. All these factors mean that Italy’s longstanding and world famous problem with its national debt is likely to get worse rather than better in the short run,[1] and Monti’s sincere desire to achieve fiscal rectitude by balancing the budget in truly Teutonic style seems increasingly unrealistic.[2] Whilst the 10% general unemployment rate and the 36% youth unemployment rate are less dramatic than those of either Greece or Spain, they hardly suggest that Italy is in a strong position to stage a rapid recovery.
Instability
Political instability has increased in the wake of the May local elections, as the mainstream parties debate the best way of responding to the advance of Beppe Grillo and the Movimento Cinque Stelle (M5S). At one stage the odds on an October 2012 general election seemed to increase, as Berlusconi contemplated withdrawing support from Monti in the hope that disassociating himself from austerity might avert a total meltdown of his Popolo della Libertà (PdL) and some elements within the ex-‘official communist’-dominated PD were attracted by the idea of taking rapid advantage of their position as first party in the opinion polls in case the tide started to flow the other way.
It should be stressed that the Italian constitution offers a limited choice between October 2012 and April 2013 because an early general election during the last six months of Giorgio Napolitano’s seven-year presidency is strictly forbidden. So, if Monti survives the next few weeks, he has every likelihood of remaining premier until the scheduled dissolution, as there is no other likely contender who could be sure of commanding a majority in the existing parliament. Needless to say, Monti is now calling upon the parties making up his parliamentary majority to unite behind him and pass all necessary measures without further ado if Italy is to stave off this week’s pressure from the markets.
Berlusconi has flirted with the idea of creating a new political formation alongside, or possibly instead of, the PdL and has suggested that such a project would exclude candidates over 45 years of age, a requirement which understandably has very little appeal to many of the longer-serving PdL stalwarts.[3] This idea was presumably designed to win over some of the supporters of M5S by apparently rejecting the conventional party format and emphasising youth and novelty. There is also much talk of American-style primary contests for a new centre-right candidate for premier, in effect aping the procedure that the Italian centre-left (whose leading force, the PD, has taken its very name from US politics) has adopted on a number of recent occasions. This has not gone down all that well with PdL party secretary Angelino Alfano, who had assumed that he had been given this role by Berlusconi as of right.[4]
Various potential candidates have been mentioned in the press, ranging from the former socialist and erstwhile foreign minister, Franco Frattini - who arguably might have some credibility with his counterparts on the European centre-right - to the thuggish Roman mayor, Gianni Alemanno. Alemanno’s supporters were recently involved in a fist fight in the council chamber with opponents of their water privatisation plan - an incident that seemed to mirror the behaviour of the Greek Golden Dawn leadership, as well as reminding the more politically conscious of Alemanno’s own not so remote past in the more extreme end of the neo-fascist Movimento Italiano Sociale.
It is still far from clear whether the PdL and the PD can come to an agreement on a new electoral system within the next few weeks or whether the next general election will be fought under the now notorious Porcellum created by Berlusconi and Roberto Calderoli before the 2006 election. Considerations about the relative weight of proportional representation and first-past-the-post constituencies, about the size of constituencies, about prizes for either the winning coalition or the winning party, and so on and so forth, have a practical implication for the tactics and alliances that both the PdL and PD will adopt, and proposals for modifications are very rarely based on considerations of abstract justice, as opposed to immediate party advantage. It seems unlikely that Berlusconi’s renewed proposals for a shift to a French-style semi-presidentialism will go anywhere in the short term, since there is not enough time for major constitutional changes to get through parliament in this legislature.
Centre-left
On the centre-left, the situation is becoming slightly clearer. PD leader Pierlugi Bersani seems to have made up his mind to break with Antonio Di Pietro and Italia dei Valori (IdV), claiming Di Pietro is worse than Grillo.[5] The IdV’s opposition to the labour market reform law in the recent Senate vote added to the PD’s annoyance about the IdV’s consistent refusal to vote for the Monti government’s austerity measures on a number of previous occasions.
Moreover, Di Pietro’s allegations of a PD inciucio (stitch-up) with the PdL - in relation to both nominations for bodies meant to oversee television (and thus monitor possible abuses by Berlusconi and his business associates) and the wording of the as yet far from finalised anti-corruption draft law - seem to have been a bit too close to the bone, provoking angry retorts about alleged defamation, something Bersani is very unlikely to pursue in the courts. At a conference organised by the metal workers’ union, FIOM, last weekend, Di Pietro talked of “the hypocrisy of those who in parliament … give a vote of confidence over article 18” - a comment which got a very favourable response from the assembled engineering workers, in sharp contrast to the sustained heckling that greeted both Bersani’s own comments about article 18 and his more general defence of his decision to support the Monti government in the aftermath of Berlusconi’s downfall.
Nichi Vendola, the leader of Sinistra Ecologia e Libertà (SEL) chose to sit next to Bersani at the conference and, despite his pretensions at mediation between Bersani and Di Pietro, seems to have sided with the PD against the IdV. Vendola’s claim that “I choose the platform of FIOM without ifs and without buts” in a recent interview[6] is about as convincing as his claim made at the same time that “I am not devoured by personal ambitions”. Vendola is desperately hoping that the PD will agree to an open primary of the whole centre-left, not one confined to the PD, to advance his own claim to be candidate premier, more or less regardless of the programme of the coalition.
If his references to “social crisis” and “mass unemployment” in the interview already referred to had any real meaning, he would be trying to unite the forces of the radical left against Bersani’s PD, in the way Alexis Tsipras rejects Pasok’s endorsement of ECB austerity, rather than implicitly endorsing PD collusion with the neoliberal offensive. The interview also implies that Vendola is thinking of liquidating SEL into some broader, more nebulous formation; from the context it is quite obvious that this is not some attempt to created an Italian equivalent of Syriza.
Widespread rumours suggest that Vendola intends to rally the Sicilian SEL alongside the Sicilian PD in support of a UdC candidate for the presidency of the Sicilian region. However, it seems extremely likely that Bersani and the PD leadership, who had a crucial meeting to decide their line a few days ago, would prefer to replace the IdV with the UdC as their political allies at the national as well as the Sicilian regional level.
Bersani’s other main potential challenger in any centre-left primary is 37-year-old Matteo Renzi, the current PD mayor of Florence. Renzi has spent years building up a network of, generally young, careerist PD full-timers, mainly local administrators, and endlessly repeats the totally vacuous, but quite blatantly self-serving, demand for a younger generation to sweep away the existing ageing PD leadership - Massimo D’Alema, Walter Veltroni and obviously Pierluigi Bersani himself. Renzi’s own political orientation is revealed by the fact that his rabid neoliberalism once took the form of a demand that Florentine shop workers should be deprived of their May Day bank holiday to boost the tourist trade; it would be impossible to find a more obvious indication of a mayor siding with capital against labour.
Notes
1 . The EU estimate is 123.5% of GDP for 2012 and 121.8% for 2013. The slightly more optimistic Italian government estimates are 123.4% for 2012 and 121.5% for 2013.
2 . The EU estimate of Italy’s budget deficit is -2.0% for 2012 and -1.1% for 2013. The Monti government is sticking to the slightly better -1.7% for 2012 and -0.5% for 2013.
3 . The Corriere della Sera (June 8) lists five candidates under 45 with matching photographs - all of whom have been ministers in Berlusconi’s governments. It is probably not a coincidence that four of them are female.
4 . Berlusconi, who is likely to be 76 by the next general election, seems to have accepted that he himself cannot be prime minister again, although he doubtless believes that any PdL candidate would in effect accept his instructions on important issues. It is, however, very important to Berlusconi that he is re-elected to parliament, given the protection that parliamentary immunity offers him in his legal travails.