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|Delaying Elections will Prolong Italy’s Misery|
FT - September 13, 2013
Westerners are forever lecturing others that they should hold elections and respect democracy. But when they might have to hold some polls themselves they cry “Instability! Danger!” That is a not-too-unfair description of the reaction in the Italian political establishment and in bond markets to the collapse of Italy’s latest wobbly government and the prospect that it could bring about the country’s second set of elections this year.
The bond markets’ response is the more reasonable of the two: new uncertainties require new risk premia. But the uncertainty caused by the resignation of Silvio Berlusconi’s ministers from Enrico Letta’s government simply follows the previous certainty that the Letta government was paralysed.
His government had been hobbled ever since it was formed as a distinctly unGrand coalition in April, to bring to an end two months of stalemate following inconclusive elections in February, but has been utterly paralysed ever since Mr Berlusconi became a convicted criminal on August 2nd.
The former prime minister, who has dominated Italy’s political scene for two decades, could have responded to that conviction for tax fraud by acting as a noble martyr, pleading his innocence but accepting his punishment for the sake of the nation. Instead he chose to challenge all the country’s political institutions—its judiciary’s right to convict him, Parliament’s right to expel him under a recent law that forbids convicts from keeping their seats, the government’s right to continue in office, even the head of state’s desire to protect the constitution. The result was paralysis.
A paralysed government, even one led by an able, reformist man like Mr Letta, is worse than no government at all. As every economist and political pundit knows, Italy needs a raft of reforms to cure the ills that gave it by far the worst economic performance among the G7 rich nations over the past 15 years, and a raft of political reforms to make its elections, its parliament and its judicial system fit for purpose.
A government formed of sworn enemies, ranging from Mr Letta’s left-wing Democratic Party, through the tiny centrist forces of his predecessor Mario Monti, to Mr Berlusconi’s right-wing People of Liberty party, was never going to be able to implement more than a modest portion of those reforms. It was a holding operation, designed to see off the threat posed to the old political parties by the showman Beppe Grillo’s insurgent, populist Five Star Movement, which came from nowhere to take a quarter of the votes. Yet until paralysis set in, holding was the best that could be done.
Now Mr Letta is going to attempt another holding manoeuvre: on Wednesday he will try to win over enough defectors from Mr Berlusconi’s and Mr Grillo’s parties to win a confidence motion in Parliament and form a new government. No doubt it is his duty to try, and if he were to succeed in causing a major split in Mr Berlusconi’s party he might do some lasting good. But this is still not a proper solution, in a democracy.
The proper solution, and in fact the only way in which a real reform programme stands any chance of being introduced, is through new elections. The Italian media protest that according to opinion polls new elections will still result in a stalemate. Maybe they will, but this conveniently forgets the way in which the polls swung violently and unexpectedly during the February campaign.
There is everything to play for—as long as the Italian political establishment is prepared to learn the lessons of February. The first is that if you let Mr Berlusconi determine the political agenda, making him the centre of attention, he will prosper. But the second, and biggest, lesson is that what Italian voters want is change—they crave a real sense that political leaders understand what has gone wrong, and that they actually want to do something about it. That sense is what the old political leaders failed to offer in February, but need urgently to do so now.
The future of the whole euro area hangs on a kind of race between the internal devaluations and structural reforms being demanded of the debtor nations by Germany, and the loss by voters of the patience required to follow that painful course. In Italy, the euro area’s biggest sovereign debtor, reforms have barely begun and yet voters have already lost patience with their leaders. Putting elections off won’t make that any better.