The real threat to Matteo Renzi is Beppe Grillo and his ilk

30.11.16 Publication:

Everyone wants to list Italy’s constitutional referendum on
December 4th as the next stage in the Great Global Populist
Revolution. But here’s a funny thing: among the campaigners for “no” are not
only the insurgent Five Star Movement led by comedian Beppe Grillo but also establishment
figures such as Mario Monti, a former prime minister, and many members of the
Democratic Party, the keystone of the current government.

Blame Benito Mussolini. For if
Italy’s current prime minister, Matteo Renzi, wants to win his referendum
against the polling odds he is going to have to deal convincingly with the
ghost of il Duce during this final
week’s campaigning.

            The mistakes
that Renzi, who in 2014 became Italy’s youngest prime minister since
unification in 1861, has made with this referendum begin with his decision earlier
this year to declare it a personal make-or-break. Given Italy’s chronic lack of
economic growth, unemployment of 11.7% of the workforce and stagnant household
incomes, the verdict on his government’s record cannot be other than negative.

            He is
having to campaign on promises of bringing change and better times that might
have worked in a general election two years ago, had he had the guts to call
one, but are much less convincing now – whether or not they are true. But he
has a second, even bigger weakness: to bring about change his constitutional
reforms stand to concentrate much more power in the hands of the prime minister
than Italians have been accustomed to since the days of Mussolini, which would
make the prospect of a Five Star government even scarier.

            Some, like
Monti, are opposing that concentration of power because they don’t like or
trust Renzi. Others, because they fear Grillo. Either way, the omens for
December 4th look poor.

            It is far
too late to row back on most of this. Mr Renzi’s plan to strip the Senate of
most of its powers, replacing the elected upper house with one filled by
appointees mainly from regional assembies, makes sense. The country’s perfect
bicameralism allowed plenty of laws to be passed, but delayed or blocked
fundamental reforms. It also makes sense to abolish the largely redundant and
duplicative provincial governments, which just complicated the life of city
mayors and regional governors, and added to the potential for corruption.

element of the plan makes sense, a decision to shift decision-making on big
infrastructure projects up to central government especially so. The trouble is
that once all the reforms are added together they represent a thorough stripping
away of checks and balances. As a way to get things done, this has appeal. But
the old trope about Mussolini getting the trains to run on time comes to mind.

            In fact,
the biggest source of worry is not even on the referendum ballot: a new
electoral law for the Chamber of Deputies, passed last year, which is designed
to ensure that the winning party can gain an absolute majority. This naturally
appeals to Mr Renzi, who has governed for the past two years through a rickety
coalition. But it also represents the greatest chance of the Five Star Movement
getting into government and being able to implement its demand for a referendum
on Italy’s euro membership. It is what makes the loss of checks and balances so

            The moment
such a euro referendum were called – actually, probably the moment Five Star
formed a government – Italian bond markets would go crazy, most likely bringing
about a new banking crisis and potentially blowing up the whole single

September, Renzi hinted that he would reconsider the electoral law after
winning on December 4th. Yet few believe him. If he is to stand a
chance of overturning his current big deficit in the polls, he needs to make a
clear and credible promise about this.

The electoral law delivers a big
“majority premium” to the winning party in a second round of voting, reducing
the incentive to form coalitions. It would be better to abolish the second
round and either eliminate the majority premium or offer it only above, say, a
threshold of 40% of the votes. That would favour coalitions – which Five Star
is hard-pressed to form.

Defeat on December 4th
will not bring Five Star to power immediately. No election is required until
February 2018. Most likely, if Renzi quits or is defenestrated, he would be
replaced by another Democratic Party bigwig or a technocrat. But then, too, the
key task will be to reform the electoral law. Otherwise il Duce Grillo would become a real prospect. And that would be no