Tremor from Italy amid political crisis

 
Enrico Letta, 26 September 2013 Days of negotiations dawn as Enrico Letta tries to avoid elections

Prime Minister Enrico Letta will try to save his government over the next two or three days but Italy is in political turmoil.

During the recent election campaign in Germany, the Finance Minister Wolfgang Schaeuble said: "The world should rejoice at the positive economic signals the eurozone is sending almost continuously these days."

His comments attracted some criticism; after all, rejoicing seemed a touch inappropriate when some countries had youth unemployment around 50%.

Others like Mario Draghi, the president of the ECB, had sounded a different note. "I am very very cautious about the recovery," he said. "I can't share the enthusiasm ..."

It is hard to know but some of his caution may have had its roots in his native Italy.

Italian politics are never far from crisis. The political caste that inhabits the Palazzo Montecitorio revels in intrigue. Italy has had over 60 governments since the World War II.

For a long period the comings and goings of prime ministers passed without much comment. Not any longer.

Italy is the third largest country in the eurozone. It has debts of 2 trillion euros and is the world's third largest bond market. It remains true that despite the European Stability Mechanism (the eurozone's giant rescue fund) that Italy is too big to be bailed out. The country is still in recession; the longest since World War II.

Seven months ago Italy fought an inconclusive election campaign. There was no clear winner. President Giorgio Napolitano, mindful that the markets could turn against Italy, helped forge an unlikely coalition between the left and the right.

Crying out for reform

Suddenly the Partito Democratico - the social democrats - were in partnership with Silvio Berlusconi's People of Freedom Party.

Italy was crying out for reform. It had a political system that did not function with an over-paid political class. (At the election the comedian Beppe Grillo had won over 20% of the vote on a platform to dismantle political corruption.)

Under the previous Prime Minister Mario Monti there was an attempt to free up the labour market but more radical reforms were needed. A start had been made on clamping down on tax evasion but often the actions seemed like high-profile stunts; pulling over Ferrari owners and asking them to explain how they afforded their vehicles.

Ex-PM Silvio Berlusconi Berlusconi pulled his ministers out of the government

Above all Italy needed growth. The economy had been flat-lining for a decade and had racked up huge debts. From the start the new coalition was a fragile marriage, marked by political bickering.

There were uneasy compromises and differences of substance. Berlusconi and his allies fought hard against a property tax but, without it, there was a 5bn euro hole in the finances. Other measures, including an increase in VAT, were needed if Italy was to meet its spending commitments.

Whatever the disagreements, Berlusconi seemed to understand that the voters wanted stability and had no appetite for another election.

Strains

A strained relationship soured after Berlusconi's conviction for tax fraud was upheld by the Supreme Court at the start of August. He faced expulsion from the Senate, house arrest for a year and a ban on holding public office.

For the past two months his supporters have been trying to find a way around these penalties. There were numerous threats to bring down the government, although it was never clear how that would help Berlusconi. At times the Letta government seemed paralysed.

At the end of last week Mr Letta concluded no further legislation could be enacted unless the political crisis was resolved. He decided to hold a vote of confidence.

Italian Senate A committee of the Italian Senate will decide on Berlusconi's expulsion this week

Berlusconi did not want that and urged five of his ministers to resign their cabinet posts, so bringing down the coalition. Mr Letta called it ' a crazy gesture" to cover up Berlusconi's personal affairs. In his view it had nothing to do with opposition to the increase in VAT.

The future is now uncertain. Italian ministers are wary of the response from the markets. Some say if there is a long period of instability then the credit ratings agencies will downgrade Italy.

President Giorgio Napolitano says that he will only dissolve Parliament "as a last resort". He is exploring whether another coalition can be scrambled together. Silvio Berlusconi wants a vote "as quickly as possible". On his 77th birthday he seems determined to bet his future on increasing his influence at the polls.

Risky

It is a risky bet. He may even struggle to hold his party together. Some of his ministers opposed the collapse of the coalition.

Almost certainly there will be days of attempted deal-making and a vote of confidence. Italy's Labour Minister Enrico Giovannini said: "If instability were to persist and affect the eurozone, then international authorities could put much stronger pressure on national authorities".

It was a warning that Brussels and Berlin could start flexing their muscles if the euro-zone crisis returned.

Italy - as it has been for the past year - is protected by Mario Draghi's promise to do whatever it takes to defend the euro. Those words, never tested, have kept the markets at bay, unwilling to bet against the central bank. Mr Draghi will be watching to see whether last year's promise still deters the markets.

It has been said many times before that we are witnessing the final act in Silvio Berlusconi's career. His political influence is on the wane and it may just be that the voters are no longer willing to risk stability as part of a battle over his legal convictions.

Yet once again the future of Italy is tied into the personal drama of the man who likes to call himself Il Cavaliere, but if the markets turn against Italy, Berlusconi and his allies could yet be forced into making a compromise.

 
Gavin Hewitt, Europe editor Article written by Gavin Hewitt Gavin Hewitt Europe editor

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  • rate this
    0

    Comment number 136.

    LucyJ

    ´N.S.A. Gathers Data on Social Connections of U.S. Citizens´

    http://www.nytimes.com/2013/09/29/us/nsa-examines-social-networks-of-us-citizens.html?_r=0

    "... according to documents provided by Edward J. Snowden, the former N.S.A. contractor."

  • Comment number 135.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • rate this
    0

    Comment number 134.

    117 Lucy

    "Obama authorized to continue it so you can thank him for that, too"

    The point I made is not that a president supports it but that a country and its business leaders found it necessary to spy on other friendly nations. They'll never be trusted again

    Is it because of your industrial espionage that you can claim: "America has the most advanced developments in the world"

  • rate this
    0

    Comment number 133.

    #132 Phffft

    --at least something ´ticks´ here.

  • rate this
    0

    Comment number 132.

    74 Margaret Howard. By all accounts it was a lovely clock

  • rate this
    0

    Comment number 131.

    #127 UKexile

    "OK, I listened to it, but dont understand the point you are making."

    -- The ´appeasement´ many now condemn --has (had) many facets.

    "The only thing that comes to mind is the eu’s obsession with land & population grab."

    --what is that for nonsense -- even the UK banged at the door --and can leave when they want.

    --others are waiting --with less Hubris and false pride.

  • rate this
    0

    Comment number 130.

    126 qot
    Thesedays, without an eu, Germany would;
    annexe Austria
    claim part of CZ
    march into the ’low countries’
    overrun France
    lay seige to GB
    then attack Russia ?
    Sorry but ABSOLUTE RUBBISH !
    The people, not eurocrats, of Europe are more knowledgable, and you know it !
    I'll check back tomorrow, hope U dont get anymore censorship !

  • rate this
    0

    Comment number 129.

    #126 DH

    "I don't get you QOT. You clearly loathe Greece & Italy, but love the 'family' of Nations motif.

    Doesn't add up"

    (Italy?)

    Listen to the BBC podcast.

    Nationalism at the time in Britain was expressed as Feudalism, Communism, Socialism, Fascism and Pacifism.

    --and just sick of Wars.

    --Listen and then we can discuss.

  • rate this
    0

    Comment number 128.

    117. LucyJ

    > America has the most advanced developments in the world <

    Oh yes. As everybody knows, Americans invented the electrical battery, the fountain pen, the biro, the compass, the radio, jet propulsion, the daily paper, gasoline, the railway, the balloon, the walkman, the MP3 format, and a lot more things.

    Long live American exceptionalism!

  • rate this
    0

    Comment number 127.

    124 qot
    OK, I listened to it, but dont understand the point you are making. The only thing that comes to mind is the eu’s obsession with land & population grab.
    Who is attempting to rewrite history ?
    If I could rewrite, or change, one bit of history, I would put the clock back to 1914 & UK would not get involved in WW1.
    Do you work for the eu ? Dont be shy.....

  • rate this
    0

    Comment number 126.

    #125 DH

    "And equally dislikable (sic) are those who are eager to give up their, and everyone else's, nationality for a nebulous Utopian pipe dream."

    --and what is Nationalism ?

    British subject and EU citizen takes nothing from you. One can still wave the Union Jack and have it draped over your coffin if wished.

    -The EU would rather not have the latter happen -- its main function.

  • rate this
    0

    Comment number 125.

    124. quietoaktree
    nothing so sinister --just dislike when some attempt to rewrite history to fit their Nationalism
    --
    It sure does. And equally dislikable (sic) are those who are eager to give up their, and everyone else's, nationality for a nebulous Utopian pipe dream.

    I don't get you QOT. You clearly loathe Greece & Italy, but love the 'family' of Nations motif.

    Doesn't add up.

  • rate this
    0

    Comment number 124.

    #123 UKExile

    "You sound quite fanatical, does your livelihood depend on the eu ?"

    --nothing so sinister --just dislike when some attempt to rewrite history to fit their Nationalism --happens constantly.

    10 minutes of your time ?

    http://www.bbc.co.uk/podcasts/series/witness

    On Appeasement --Chamberlain

    -- British views, fears and hopes at the time --cannot condemn and won´t !

    -- Yes.

  • rate this
    +1

    Comment number 123.

    102 qot
    I, like you, cant tell the future. When / if the referenum comes I'll look at the arguments & place my 'X', and then I'll live with it.

    You sound quite fanatical, does your livelihood depend on the eu ?

    Did your #97 fall foul of mentioning those 'pilotless airbourne objects' ?

    120 mh
    Heard that from you before !

  • rate this
    +2

    Comment number 122.

    120. margaret howard
    how do you explain its steady rise since its inception and preferred world status?
    --
    Marg, the reason for this is that the euro is widely speculated on by the very same bankers & finance houses that you frequently wax lyrical on.

    So your precious euro is popular due to the machinations of the very same bankers that you claim to despise.

    Hmm. Loss of wriggle room methinks

  • rate this
    +2

    Comment number 121.

    DBumstead: Eurozone nations are NOT each others' keepers

    Well actually they kind of are

    If Germany doesn't help Italy, Italy could take down the Eurozone which would harm Germany and other Eurozoners

    So Eurozone countries all depend on each other
    as opposed to being self sufficient

    D: Nobody benefited from the euro

    The people who want to integrate Europe as one have

  • rate this
    0

    Comment number 120.

    118 Bumstead

    "As for the euro having worked......... do you really believe that? It hasn't worked and never will. Nobody benefited from the euro"

    So how do you explain its steady rise since its inception and preferred world status? The euro is currently the second most commonly held reserve currency.

    What you wish for and what is reality are two different things

  • rate this
    0

    Comment number 119.

    112 EU

    "The Swiss army has carried out a training exercise which simulated an attack by France"

    Will they copy the US and give them silly names like Desert Storm, Eagle Claw, Operation Earnest Will, Deliberate Force etc?

    May I suggest Operation Alpenhorn or Mountain Goat?

    Or how about "Climb every mountain" with Julie Andrews yodelling in the background?

  • rate this
    +1

    Comment number 118.

    110/111 Sorry, but Eurozone nations are NOT each others' keepers; both Maastricht and Lisbon treaties specifically rule out ANY kind of bailout, whether by other nations or the European Central Bank. Bailouts were and are therefore illegal.
    As for the euro having worked......... do you really believe that? It hasn't worked and never will. Nobody benefited from the euro.

  • rate this
    +2

    Comment number 117.

    Marg: Sinking America is now desperate enough to spy on advanced European developments

    America has the most advanced developments in the world

    Our problem is we are being taken down by our own President's mismanagement

    As for the spying, it only started under Bush Jr and Obama had the choice to end or continue it

    Obama authorized to continue it so you can thank him for that, too

 

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