by John Pickard, Brentwood Labour Party, personal capacity
The Italian coalition between the Five Star Movement and the League is on. Then it is off. Then it is back on again. For now.
The rapid, almost daily, changes in the composition of the government in Rome is a prelude to a prolonged period of political and economic turbulence in Italy, unusual even by the standards of shaky Italian governments.
Who would have thought a week ago that an 81-year old economist, a complete unknown to most Italians, never mind those outside the country, could single-handedly raise the spectre of a new financial crash? But that is exactly what happened.
The crisis had first come to a head when the original government proposed by the coalition included as Prime Minister Giuseppe Conte, another unknown, and the aged signor Paolo Savona as Finance Minister. The Italian president, Sergio Mattarrella, had no problem endorsing Conte, but the difficulty with Savona was that he has a history of strong antipathy to the EU and the Euro and he had suggested as recently as three years ago, that Italy should prepare a “Plan B” to leave the Euro.
It was for this reason that Mattarrella vetoed Savona’s appointment, cancelled his prior agreement that Conte be Prime Minister and appointed a former IMF official, Carlo Cottarelli, as interim prime minister, to run a so-called ‘technocratic’ (ie non-party) government.
There had been no serious intention on the part of the 5SM/League coalition to leave the Euro, but even the suggestion that their government was opposed to the economic norms of the EU and the domination of the EU by the powerful northern economies, chiefly Germany, was enough to spook the financial markets and world banks. More than anything, Mattarella’s veto on Savona was a block on those coalition policies that would have decreased taxes, while increasing government expenditure, thus drastically increasing the government budget deficit. Although the Italian government, like others in the eurozone, is signed up to the 2012 pact to keep a tight lid on fiscal balances, the composition and policies of the proposed coalition threatened to blow that lid clean off.
The Italian government debt is already €2.3tn, or 132 per cent of GDP, the eurozone’s largest in absolute terms. The danger to the European and world banks is that Italy, the third biggest economy in the eurozone, would go the way of Greece, or worse, that Italy (an economy ten times bigger than Greece) could bounce out of the euro altogether.
During the worst moments of the financial panic that followed the veto on Savona, the head of the Italian Central Bank warned darkly that Rome was “on the cusp of losing investors’ hard-won trust”. Banks shares and stock exchanges across Europe fell. Italian banks were hit hardest: UniCredit, losing over 5 per cent of its value. Spain’s Santander was also down 5 per cent; France’s Paribas down 4.5 per cent; Germany’s Commerzbank down 4 per cent. Even some of Wall Street’s banks fell, including JPMorgan, Citigroup and Bank of America, all down 4 per cent. Bankers were talking in hushed tones of a new crash.
The cost of Italian government borrowing – all governments borrow on the open market on a week by week basis to fund their activities – saw a sharp increase in terms of interest payable. The greater the ‘risk’ the higher the interest rate a government has to offer to sell its ‘bonds’. In the worst period of the recent crisis, Italian “two-year” bonds jumped as high as 2.69. Interest on 10-year bonds rose to 3 per cent, the highest for four years.
The economic crisis has accentuated the divisions between the stronger eurozone economies in northern Europe and their weaker partners to the south. “The issue is that the crisis exposes underlying deep divisions within the eurozone over its future direction”, said the chief economic of the Axa insurance business, “We could perhaps afford this with Greece, but not with Italy.”
If Italy were to crash out of the euro, Martin Wolf writes in the Financial Times, “the damage would be huge. Yet even this ignores the wider economic, not to mention political impact”. Writing what many bankers might well be thinking, he added, “It will be harder to bully Italy than Greece…”
Important lessons for an incoming Labour Government in Britain
It is worth making the point that the panic on the stock exchanges and bond markets was not only a reaction to the possibility of a very strongly-Eurosceptic government coming into office, but it was also a warning to Italian politicians to toe the line. “The rules of the game can be debated, even criticised; they can surely be improved,” said the head of the Bank of Italy, “yet, we cannot disregard constitutional restraints; protecting savings, balancing the accounts and respecting treaties.”
It is a small taste of what will happen, for example, if and when a radical Labour Government is elected under Jeremy Corbyn and if it promises to implement policies that are to the advantage of “the Many, not the Few”. In that case, it will be the governor of the Bank of England, telling the elected government that it can modify the rules of the “game” (ie capitalism), but it cannot switch to a different one.
The 5 Star Movement-League coalition has now been resurrected. President Mattarrella has pushed aside his temporary stand-in, Cottarelli, and has once again allowed Conte to assume the prime minister’s office. The two coalition parties are probably chastened by the experience of the last week and have no doubt made agreements behind the scenes to mollify the banks and the EU about their intentions. The new agreement may have settled the financial markets for the moment, but from the point of view of Italian workers, having this coalition coming into office represents a serious political setback and a threat to their economic and social interests.
Both of the coalition parties are nominally anti-Establishment ‘populist’ parties and they owe their votes in the March general election to the generalised discontent with the political classes in Italy. Italians feel they have been left out. Unemployment is still at 11 per cent, much higher than the eurozone average. Although the ‘idea’ of the Euro is still very popular (as it has always been in Greece), many Italians, like UKIP voters in Britain, feel at best semi-detached from the EU.
Although the coalition agreement suggested that there would be tax cuts, the majority of these were going to affect the rich and the super-rich, with a relatively modest gain for workers. Campaign promises of the 5 Star Movement, for ‘green jobs’ for greater welfare support and a living wage were diluted down in the agreement so that many workers would have been hardly better off.
More significantly, both parties fought the election on anti-immigrant policies and these are reflected in what was going to be the policies of the coalition. The League particularly, formerly the Northern League and based on a semi-separatist platform for the industrial north of Italy, is on the far right of Italian politics, as bad or worse than the National Front in France. The right-wing anti-immigrant quality of the coalition will be further boosted by the support announced by the Brothers of Italy, another far-right party aligned to the League on many issues.
Like in Britain during the EU referendum, where the xenophobia of UKIP and the Tory right-wing offered an warped ‘respectability’ to racist abuse and harassment, the Italian election was marked by abuse and attacks on immigrants and many black and Asian Italians. Salvini, the leader of the League, posed for Twitter in front of a bulldozer, the implication being that he would bulldoze the Roma settlements near to Rome.
Both of the coalition parties based themselves on a policy of ‘Italians first’ and the coalition, is committed to building camps for ‘illegal immigrants’ and to the forced expulsion of half a million. The coalition policy will be giving a green light to any racist attacks, including physical and violent attacks on black and Asian workers. Not only will this have a seriously damaging effect on the social fabric of Italian society, it could seriously undermine the solidarity and unity of the trade union and labour movement.
The tragedy of the March general election was that there was no party that offered an alternative to austerity, other than the ‘Italians first’ populists like the 5 Star Movement and the League. The PD (Democratic Party), made up of fragments of former left parties, liberals and sundry ‘centrists’ offered nothing. Indeed, that party had been in power for the past four years, during which time the living standards of many Italians became ever more precarious.
Had there been a real workers’ party and a socialist leadership worthy of the name, it could have campaigned on the need for fundamental change. It would have pointed out that immigrants are not responsible for rotten housing, unemployment and other social ills. Italy has been beset for decades by political corruption, with the political ‘class’ tied by a thousand strings to big business freemasonry and even to the mafia. Graft is the normal way of life of the upper reaches of Italian politics and ordinary workers are fed up with it. But in the general election there was no socialist alternative on offer.
Once the biggest Communist Party in Western Europe
The 5SM/League coalition is the most right-wing Italian government since the war. The responsibility for this defeat for the working class has to be laid at the feet of the labour and trade union leaders of the recent past. Italy has some of the best socialist fighting traditions of anywhere in Europe. It was the Italian Communist Party, more than any other political movement, that was responsible for the overthrow of Mussolini during the war and the subsequent eviction of the forces of Nazi Germany. So strong was the Communist Party after the war that it could have taken power – but it handed power back to the discredited capitalist class under the orders of Stalin who had done a ‘deal’ with Churchill and Roosevelt over ‘spheres of influence’.
Even as late as 1976, the Italian Communist Party was able to get over 34 per cent of the votes – 12.6 million – in a general election. It was the biggest and most powerful Communist Party in Western Europe. But it was also the most right-wing and as it gravitated ever further in that direction – via ‘Euro-communist’, an Italian equivalent of ‘New Labour’ – its support melted away, until it eventually dissolved itself in 1991.
It is impossible to predict with any certainty where Italy will go next. The whole situation is still pregnant with all kinds of possibilities – of new elections, new economic and financial crises and social unrest. The Financial Times columnist Martin Wolf, an astute reader of political developments from a capitalist point of new, commented on the possibility that the coalition might create economic panic. Under the coalition, he suggests, “the flight of capital, people and business could be devastating. Given all this, another election might see the emergence of a still more radical government or, at worst, the unity of Italy might come into question…note that Spain too has increasing debts.”
Italy facing a period of renewed instability and uncertainty
One thing for sure is that Italy is facing a period of renewed instability and uncertainty, even by the standards of a state with a tradition of instability. Whereas the UK has had 14 prime ministers since the Second World War, Italy has had over 40. It has had four in the last three months alone. The Christian Democrats have provided the big majority of these prime ministers, but that party, mired for decades in graft and corruption, is a spent force. The March election may have ushered in a pattern of short-lived and unstable governments. None of these governments, based on the continuation of Italian capitalism, will offer workers a way out of their insecurity and uncertainty. Opposition to austerity will inevitably grow, as it is in every other country of Europe. Attacks of black and Asian workers will add to the volatility and unrest.
The social maelstrom that is beginning in Italy follows the pattern that has already been set by the political upheavals in Greece in the last few years. Here, there have been dozens of general strikes and an untold number of demonstrations, occupations and struggles as Greek workers have sought to oppose austerity in the polling booths, in the workplaces and on the streets. The ‘Greek’ pattern will be repeated not only in Italy, but soon also in Spain, where a weak government is on the brink of being brought down following its own corruption scandal.
In the stormy events unfolding, it is essential that a socialist opposition is developed at some point, in order to point a way forward for the mass of Italian workers. The 5SM/League coalition is not yet the fascist ‘march on Rome’ of 1922. It poses a threat to the labour movement, and particularly to any workers of ‘non-Italian’ heritage. But it is a government that could still be swept away again by a rejuvenated and re-inspired labour movement. It is nonetheless a warning – a foretaste – of far more vicious and brutal right-wing movements that could develop in the future, if the labour movement does not lead Italian society out of the impasse in which it finds itself.
In the short term, there are no easy answers, and nothing is settled. One way or another, Italian capitalism will be challenged over and over again in the coming years. As the Financial Times (May 30th) editorial put it, from a capitalist point of view, “There can be no good outcomes from this turmoil”.
June 1, 2018
