Monday, October 3, 2022

Point of Order: Brotherhood of Europe but Sisterhood of Italy

All European elections are about Europe.

That’s one conclusion which might be drawn from the decimation (a fine Latin term that) of Italy’s governing class – and also the election of a centre-right coalition government – last Sunday.

To understand more, recall the previous election in 2018. That also turfed out the ruling establishment (and again in 1994, where Italians opted for the fresh and untarnished Silvio Berlusconi, if your memory can bear going back that far).

Last time, the two biggest and newest parties – the right-populist League and the left-populist Five Star Movement – joined in an unstable coalition.

They agreed that everything had to change, but couldn’t agree on doing it. Things went downhill until the grown-ups in Brussels insisted on a technocratic government led by Mario Draghi (the technocrats’ technocrat – former president of the ECB, Europe’s central bank, no less).

The confusion of factions they had endured gave Italy’s voters a complex mess to sort out. But they made sure everyone lost. They punished League and Five Star for squabbling, and traditional left and right for opportunism. (As an aside, the extraordinary stickability of Italy’s political elite is illustrated by the career of left Democrats’ leader, Enrico Letta, who started life as a Christian Democrat and alternated the same cabinet post – with his uncle – twice.)

So it is that Italy’s prime minister elect is 45 year-old Giorgia Meloni, leader of the Brothers of Italy.

Some are making much of her youthful involvement in the Italian Social Movement (set up after the war by former followers of Mussolini). But then Letta’s career suggests Italians sometimes tolerate flexibility.

A more useful guide to her behaviour might be deduced from the strands making up her party (and indeed her wider coalition) – helpfully summarised in Wikipedia as conservatism, nationalism, nativism, Euroscepticism and opposition to immigration – and the possible application of these to the situation she and Italy find themselves in.

Meloni will surely believe she has come to office on the back of a decisive reaction against the Brussels-imposed status quo.

But at least the status quo stands for something.

And while she has oodles of room to be distinctive on social policy, political economy choices look hard.

Italy’s economy is trapped between European regulation wafting industrial output towards middle Europe and local vested interests unwilling to sacrifice privileges to open competition. The country’s GDP per capita has been declining since the 2008 financial crisis; its banking system is dependent on German balances to buy Italian government debt; and it is locked in perpetual negotiations with the European Union on bailout packages.

This might tempt the EU to continue to impose on Italy, thinking to encourage the voters to come home at the next election. Commentator Wolfgang Munchau suggests that this would be a historic mistake, on a par with the EU’s misplaying of Brexit:

“This is where I think the biggest danger lies. That the EU tries to push [Meloni] around or isolate her, and that she will resist, with the Italian electorate on her side.”

Nor is it likely that a Meloni government will look at leaving the EU or the euro currency for now. The British and Greek experiences show these are neither easy, nor likely to be profitable without a great deal of political hard work. Whilst repudiating enormous loans to Germany is superficially attractive, a glance towards Argentina shows how desperate a strategy this would be.

With the Eurozone lurching into recession, and Draghi’s old home, the ECB, warning of “severe risks”, Meloni might look at the experience of her sister-fellow Liz Truss and decide now is not the time for unilateral, painful reform.

She may conclude the better strategy is to delay and try to build a stronger coalition in a sustained blame-game with Brussels, on the lines of the approach of the Hungarian and Polish populists.

As Munchau points out, past form suggests the EU will overplay its hand – both in its relationship with Italy and perhaps also in its encouragement to European political parties to exclude their growing populist movements from responsibility.

But it won’t solve Italy’s no-growth problem.

Point of Order is a blog focused on politics and the economy run by veteran newspaper reporters Bob Edlin and Ian Templeton

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