Bill Emmott - International Author & Adviser

Article

The possibility of change now is real
La Stampa - February 9th 2012

Time is said to be a great healer, but the way in which Italy’s image abroad has been transformed in the three months between President Silvio Berlusconi’s resignation on November 12th and President Mario Monti’s visit to the White House today has been nothing short of miraculous. I am sorry to be sacrilegious, but like many miracles this is a bit of an illusion. Nevertheless, illusions do matter, and so, for this miracle, do three words: centrality, truth and possibility.

            The miracle is an illusion because a country cannot change that much in three months. This view does not arise, please be assured, because I am the sort of foreign writer who prefers to think that the Costa Concordia symbolises Italy better than President Monti: that would be absurd. Rather, it arises because no one, and no new laws or budgetary measures, can change a situation that quickly.

            Most of the economic and institutional reforms that are necessary have not yet been passed into law, let alone been implemented. And plainly there remains a huge amount of resistance to the changes that are proposed, in all fields, whether labour law or tax enforcement or liberalisation of markets and professions. You cannot absolve a sinner that has not repented, wrote Dante Alighieri, and it is far from clear that repentance has occurred.

            Even so, the question of Italy’s repentance has achieved a status of centrality, which is why President Barack Obama feels a desire to encourage it. By centrality is meant the perception that Italy’s fate and future are suddenly important to the future of Europe and, in turn, to the future of the West as a whole. This pre-dates November 12th, but became more intense than ever during that hot month in the bond markets.

            As the bond markets then recognised, Italy matters, to Americans and fellow Europeans alike, first of all because of its size: as both the world’s third biggest government debtor (after America and Japan) and the eurozone’s third-biggest economy (after Germany and France), a sovereign-debt crisis and deep recession in Italy would be truly dangerous for every country closely connected to it, which means both Europe and America.

            The shadow of such a crisis grew darker because of the rising expectation of a Greek debt default, an expectation that is rising again. This is not being reflected in dangerously high Italian bond yields, chiefly because another well-regarded Italian, Mario Draghi at the European Central Bank, has averted the danger of a European banking crisis by his well-timed and massive offer of unlimited three-year lending to banks.

            Italy, though, has also attained centrality for reasons other than simply being a dangerous economic time-bomb. Chief among them is the fact that its stagnation and political paralysis during the past 20 years stand as a stark warning to the rest of the West, as well as an opportunity.

            The warning is of how slow, remorseless decline can set in if debt burdens are not dealt with and if an economy and society loses the ability to evolve, to change, the essential trait that democratic capitalist countries must have if they are to survive and thrive in this era of great technological and political ferment. The opportunity, though, is of catch-up and revival, or perhaps even renaissance, if liberalisation takes hold and if dynamic evolution resumes.

            If Italy can be reborn as a leading market economy, as it was during the 1950s and 1960s, then there is hope for Europe and the West. If it cannot, then the burdens on other countries will be higher, but also the omens for their own success will be bleaker.

            Italy is central too for the reason that, in personal terms, lay behind the notorious “Unfit to lead Italy” cover of The Economist that I ran when I was that magazine’s direttore in 2001. It is that, in the domination of politics by Silvio Berlusconi for 20 years, Italy showed the danger of democratic government becoming taken over by vast corporate, media and personal power. Laws become unequally applied and turned to personal use, the normal regulatory role of government is subverted, the constitution is undermined, and the flow of information is seriously distorted.

            This matters—and still matters—most of all in Italy itself, but it is also exactly the same worry that hangs over American politics when anyone complains about the power of Wall Street or big oil companies, or other lobbyists. It is the corrosive fear that overweening power may distort or even determine democratic decisions. The end, at least, of that power being in occupation of Palazzo Chigi itself is of great symbolic importance for other western democracies.

            One of the effects of that power is, however, the second determining word for this miracle: truth. Other governments in Europe and indeed the United States came to believe that they could not trust Italy’s word, while the Berlusconi government was in place. That was not the case in military matters, which is why the Bush administration was friendly to Italy, thanks to military deployments in Iraq and Afghanistan. But it was the case in everything else.

            Announcements, promises, claims, declarations of intent: foreign governments came to believe that none of them could be believed as anything other than theatrical performances. It was sad to see President Berlusconi continuing this habit in his interview with the Financial Times, published on February 4th, where he made yet again his impossible-to-believe promise to leave frontline politics, repeated his unbelievable denials about bunga-bunga, just to keep that phrase in the public eye, and repeated the attacks on the Italian constitution which themselves highlight the inappropriateness of his own power.

            My eye was especially drawn by that interview, it must be admitted, because recently I have been led on a typical dance by President Berlusconi myself. At an event at the Quirinale in December, where I told him that I am making a documentary film about Italy, he spontaneously said that “he was at my disposal” for an interview. He subsequently denied he had ever offered a filmed interview and said that it must have been a misunderstanding.

            In contrast, every word that President Monti says is believed by foreign governments. They know that he faces huge difficulties. But they now think he is well worth talking to and supporting, because they can believe what he says.

            Which brings us to possibility. The illusion of the miraculous transformation of Italy’s image is that Italy is certainly not transformed, and nor is it out of financial or economic danger. Recession will make the public finances worse, quite possibly forcing another fiscal package later this year if the bond markets are to remain supportive and if the eurozone fiscal targets are to be met. Liberalisation and labour reform will be hard to implement, and take many years to have a noticeable effect on economic growth. Both the politics and the economics of this process are fraught with danger.

            Yet what has changed is that now there is a real possibility of change. There is something to press for and to hope for. The Monti government, and the Parliamentary and public support that it commands, represents for the West a bright light of possibility in an otherwise dark landscape. At last, the country that more or less invented modern capitalism, that began the Renaissance that produced modern man, is stirring again after a long, catatonic sleep. That is a pretty good reason to pay attention, and to offer a warm Washington welcome.

 


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