Extraordinary things are happening in Italy. Two anti-establishment parties who disagree about everything except that the old order must be swept away, have signed up to a grotesque marriage of convenience. Their platform is a radical mixture of populist Left and populist Right measures designed to destroy the status quo. However, the irony – and everybody knows it – is that none of these can be carried out so long as the real rulers of the country are the EU.
In the run up to last year’s election, the Five Star Movement (M5S), led by Luigi Di Maio – a suited and booted 32-year-old with no degree who had previously been unemployed – preached an end to institutional corruption, an end to fiscal pardons, free internet for everyone, no more environmentally harmful infrastructure projects and, above all, a ‘citizens income’ for the poor. It was an appealing platform, securing 32% of the vote for the populist Left party.
The other party, the League, led by 46-year-old Matteo Salvini – also without a degree but boasting 15 years’ experience as a Milan city councillor and a wardrobe full of jeans and sweatshirts – demanded a lower retirement age, a new tax pardon, lower tax levels, more large infrastructure projects, and the forced repatriation of hundreds of thousands of immigrants. The populist Right party fared less well, winning just 17% of the vote, but an electoral alliance with the centre-Right Forza Italia meant that together they could win more seats.
The result was a hung parliament. And the two anti-establishment parties, who had hitherto ridiculed, berated and demonised each other, came together to form a government.
In order to govern together, Di Maio and Salvini formed a contract in which they agreed that each party could carry out its expensive flagship policies, in particular the citizens’ income on one side and the lower retirement age and lower taxes on the other. Where the two men can’t agree, fudge and procrastination has come to their aid: a tax pardon can be called “fiscal peace”, the planned high speed train tunnel under the Alps, which M5S viscerally opposes and the League determinedly supports, can be interminably ‘re-discussed’.
Unable to decide which of the two men would be Prime Minister, Di Maio and Salvini brought in Giuseppe Conte, a professor of law with no political experience, but an enviable ability to cavil – again and again Conte finds some eloquent equivocation that allows both M5S and League supporters to feel that their party has stuck to their principles.
So the country lurches about in quite contradictory directions driven by competing and antagonistic ideas, but the government doesn’t fall. Arguably, this bizarre situation is very much the product of EU membership.
Since ratification of the Maastricht treaty in 1993 Italy has been governed by alternating centre-Right and centre-Left governments, the former mainly represented by Berlusconi and the latter Prodi, then Renzi. Committed to following the Maastricht criteria and later the European Fiscal Compact in relation to annual deficit, overall debt, and various other key economic parameters, they had little room for manoeuvre. The result was that, despite a rhetoric of profound ideological division, Italians got used to seeing very little difference in economic policy whoever the party in government.
Prior to the introduction of the Euro in 2002, this situation was made palatable by a fairly steady 1.5% growth rate, comparable with Germany and the rest of the EU. After 2002, however, Italy began to lose ground, and between 2007 and 2017 it had an annual GDP decline of 0.6% compared to a German growth rate of 1.2%. In 10 years, a 20% difference in economic performance has opened up between Italy and its main trading partner, and relative salary levels have fallen drastically.
Between 2008 and 2015 Italy lost 15% of its manufacturing base and the sector’s workforce shrunk by 18%. Meanwhile the construction industry shed 25% of capacity and lost 30% of its workforce. Unemployment stands at 10%, while youth unemployment is over 30%.
Most of all, there is no sign of progress and no positive future to look forward to. Every time a government seeks to follow an expansionist policy it is swiftly reminded by Brussels of the need to abide by the rigid Fiscal Compact. Sanctions are threatened and, worse still, Italian government bond rates are forced up in relation to German bonds increasing public borrowing costs, alienating foreign investors and generally worsening an already depressed situation.
This might be acceptable if Italians felt there was any democratic process that could alter EU policy. This is not the case. The idealism that drove the Maastricht process is long gone. European elections are seen as little more than an opinion poll for national parties, with no sense that the European Parliament could function as an instrument for improving economic prospects for Italy.
As the EU came to be seen more and more as an externally imposed necessity, rather than a community Italians are enthusiastically part of, it was inevitable that new parties would emerge taking an anti-European stance and criticising the leaders of the mainstream parties for abject compliance with Brussels.
This was exactly the line taken by both M5S and the League in the run-up to the 2018 election: they would get tough with the EU, they would not observe the Fiscal Compact, and their budget would allow for an annual deficit of 2.4% rather than the stipulated 2.0%. Jean-Claude Juncker could like it or lump it.
People like fighting talk. When the pensionable age for most people is 67, you can win votes promising to reduce it. When people are struggling, a citizen’s income is enticing.
And once in government, Di Maio and Salvini insisted they would not back down in the face of EU opposition to their budget proposals. It was their moment of greatest unity and bravado. But at once bond rates began to rise, the economic experts broadcast their alarms, and very soon, under the cover of Conte’s able cavilling, the retreat began. Eventually a deficit of 2.04% (only provisionally accepted by the EU) was presented as a victory.
This amounts to the infantilisation of national politics. Like a bragging schoolboy in the playground a national politician can win consensus, but the showdown with his teachers soon reminds him of his insignificance. He is caned and sent home with a raw bottom. At which point what can he do but engage in more playground posturing to at least keep his dominant position among his chums?
Thus Salvini and Di Maio have talked about turning the forthcoming European elections into a chance to fight back against EU arrogance and austerity. But even assuming the anti-EU vote makes gains, it’s hard to see that leading to real changes to the Fiscal Compact.
There are two logical ways out of this impasse and the irresponsibility and frustration it breeds. One is a move to a genuine political and fiscal union of Europe; the other is a return to increased national autonomy outside the Euro. Present animosities make the first solution unthinkable. There is no appetite for it. Yet the economic power of the markets to punish any move to leave the Euro makes the second solution suicidal; as Greece has shown.
What we can expect, then, is more and more empty rhetoric and clownish behaviour at a national level; more and more people voting in a spirit of defiance, while tacitly accepting that their vote means nothing. It is a system in which you vote for someone because of what they say they would like to do, not what they can actually do. In short, if you don’t rule your country you can’t expect a viable ruling class.