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Tuesday, March 05, 2013

Is Beppe Grillo forcing Italy to new elections?

One-by-one, Beppe Grillo and the Five-Star Movement are shutting all the doors to possible government arrangements. Vito Crimi, designated as the Movement's faction leader in the Italian Senate, told reporters yesterday:
If we were proposed a technocratic government, we would consider it. But we confirm our 'No' to a government of the [political] parties.
Less than 24 hours later, though, Crimi posted the following on his Facebook page (yes, that's how the Five-Star Movement communicates):
I never spoke of support to a technocratic government. The only solution we propose is a Five-Star Movement-led government which implements the first 20 points of our programme immediately.
Grillo himself wrote on his blog this morning,
The Five-Star Movement won't support a technocratic government, and it never said it would do so. There's no such thing as technocratic governments in nature, but only political governments backed by parliamentary majorities. [Mario] Monti's government was the most political of the post-war period.
These remarks overlapped with those made by Stefano Fassina (see picture), the economic spokesman of Pier Luigi Bersani's Democratic Party, who told Canale 5 this morning,
I exclude a technocratic government based on an agenda which has been rejected by [Italian] voters...We're not willing to form a government with [Silvio Berlusconi’s] PdL party, and if Grillo is not willing to back the [next] government, we will have to face a new round of elections, even if this is not what is needed now.
So the possibility of re-run elections has been explicitly mentioned again, as several options for compromise are being struck down. However, reports in the Italian press suggest that President Giorgio Napolitano could still have an ace up his sleeve: Italy's outgoing Interior Minister Anna Maria Cancellieri.

According to Il Corriere della Sera, Napolitano could ask her to form the new government if Bersani failed to do so. Cancellieri would lead a 'government of purpose' - meaning that she would focus on a limited number of urgent reforms, and would seek the parties' backing in parliament on a case-by-case basis. Grillo would probably not change his mind, but Cancellieri could win support from Bersani's and Berlusconi's parties. The rumours are echoed by Italian magazine L'Espresso, which features a biography of Italy's "Iron Grandma" (Cancellieri is 68 years old) on its website.

This solution could be seen by some as more desirable than new elections in the next couple of months. Whether such a government will be able to continue with the reforms Italy needs to re-gain competitiveness within the eurozone is a completely different story.


jon livesey said...

"Whether such a government will be able to continue with the reforms Italy needs to re-gain competitiveness within the eurozone is a completely different story."

Bingo. That is indeed the key point, and there are two clear meanings to the word "reforms".

There are long-term reforms to an economy, such as the ones Maggie implemented in the UK from 1979 onwards.

These are the really important ones, as we can see from the events around the ERM. The UK and Italy left the ERM at the same time and devalued by the same amount, but then the UK began to grow much faster than Italy, so that today the UK economy is around 15% larger than Italy's.

The difference, then, is long term economic reform, but Italy simply does not have the time for that.

The other kind of "reform" consists of short-term measures such as cutting Government spending and social benefits, but as we have seen in Spain, Portugal, Ireland and Greece, all those "reforms" achieve is accelerating unemployment which requires increased social spending and/or a high degree of social injustice.

F.Lukoff said...

"The reforms Italy needs." That is the key point, isn't it?

How does one induce growth in an economy that desperately needs it, but with a public debt level that is quite unsustainable once interest rates start to rise from their current historic low levels? On the other side, as a political matter, how do you tell an entire generation to wait a decade until debt levels hopefully return to a more manageable level?

In my mind, Italy's real problem is that the light industry on which it so depended has been destroyed by Asian imports. At a street market in Lido di Camaiore last week, I saw a nice pair of leather faced gloves--the kind of thing once made in Italy for all of Europe--for €2.90! No amount of economic restructuring will allow us to make that kind of product in Italy at that price level. This is not caused by some fault on the part of Italian politicians or industrialists. In my view, to return to growth, some limitation of the free trade principles embodied in World Trade Organization (WTO) treaties is going to be required in order to permit many developed countries to regain some industrial activity. No economy can run on services and ultra high value added products alone. To the best of my knowledge, this subject is not even under discussion yet. It will be.