Italy and the world

31.05.18 Publication:

Let’s face it: the typical view in the outside world about Italian political crises is that they are dramatic but not serious. That may be why so little attention was paid to the March 4thelection, either in the financial markets or foreign media. In my view, this was a big mistake, for this crisis really is serious. The best excuse for this mistake, however, is that the true crisis is a long-term one, not some sudden creation by politicians or parties.

Many foreign reactions to the crisis have been like psychologists’ famous Rorschach test: what people see in Italy’s highly ambiguous drama tells you more about those people’s minds than it does about Italy. In Britain, advocates of Brexit see the battle over Paolo Savona as vindication for why the UK is right to leave the EU. In Brussels, eminent European commissioners see it as evidence for why the eurozone’s fiscal pact is so necessary. The philanthropist George Soros sees it as proving that the EU faces what he sees as an “existential crisis”.

By contrast with commentators and politicians, the reaction of financial markets has been rather calm. It surprised me that the spread between Italian government bonds and German bunds rose so little after March 4th, given the nature of the result. The movement became larger after the Di Maio-Salvini government came closer to fruition, and especially during the institutional conflict of the last few days, but it has so far never really become dramatic, not compared with 2011.

To me, this is a severe under-estimation of the political and the economic situation of Italy. Financial markets and foreign governments should be much more worried than they are.

The political reason why they should be more worried is that the result of the March election and of the post-election manouvreing has exposed a huge vacuum in the heart of politics. It is like France in 2015-17 when the two great mainstream parties, the Socialists and the Republicans, both became discredited and a new party, En Marche, rose to fill the gap. But in Italian politics there is no Emmanuel Macron.

The Democratic Party is in disarray and Forza Italia looks like a dinosaur. In response, the policy ideas that were thrown around during the election campaign ranged from the reckless to the feckless: many involved impossibly irresponsible promises of public spending, others involved adventurous schemes that had not been properly worked out.

The point is not that the world should feel terrified of particular policies that may emerge when a government is finally formed, rather that it should feel shocked and alarmed that so little hard thinking has been devoted to what a coherent set of policies might look like. Neither Five Star nor the League are well defined by what they are in favour of; they are both chiefly defined by what they are against.

This is disturbing because Italy’s economic and social crisis has been at least two decades in the making. It is a crisis of public institutions, of the rule of law, of the functioning of the justice system. It is a crisis of a too-rigid economy in which new ideas and new entrepreneurs have been prevented from flourishing. It is a crisis of a divided and sclerotic labour market which has left huge numbers of people, especially the young, without hope or opportunities, leading so many talented graduates to emigrate.

It is therefore a crisis which one would have expected to produce an array of ideas and insights into what needs to be done, along with a great sense of urgency. And of course those ideas do exist. But they appear strangely disconnected from politics and from parties that act and sound as if they write up their policies on the back of envelopes.

Horror vacui, nature abhors a vacuum, we are told by scientists: if there is a political vacuum, a vacuum of ideas, someone and something will arise to fill it. That is what the world should really be worrying about in Italy. If there is no coherence and no consensus, then dangerous adventures may be made, led by dangerous adventurers. This drama could become more and more serious.