Italian President Sergio Mattarella addresses a press conference in Rome on May 31, 2018. Alberto Lingria/ Press Asociation. All rights reserved.
Mamma
Mia, here we go again.
Having taken the
controversial step of nominating an unelected administrator – Carlo Cottarelli to run the country, Italy's
President has sparked outrage from the populists who claim he's overridden
democracy. Yesterday, they finally got their coveted share of government; with
virtually unknown law Professor Giuseppe Conte sworn in as the new Prime Minister
on Friday.
Drumming a hard line
towards immigrants, they've threatened to make the next vote a de facto
referendum on leaving the EU. Thus, many are worried that Italy will
be the next to follow the UK into European autonomy, sparking a domino effect
in an already vulnerable post-Brexit Europe.
The meltdown of attempts
to form an Italian government last week sent world markets into a spin.
Grappling with its own version of the populist backlashes we’ve seen throughout
the US and UK, Italian government bonds spiked sharply above 3 per cent.
In the following days, Wall Street slumped more than 1 per cent, while Italy’s stock index plunged
2.7% overnight.
So the EU (and the rest
of the world) are definitely worried. But it’s the uncertainty of what’s coming
next more than anything that is bothering financial markets. Will Italy follow
Britain into its own European exit, dubbed “Quitaly”? Who knows, but we must
remember that Italian politics are always volatile and politicians everywhere
are prone to hyperbole.
If the Italian populists,
Lega (League) and the Five Star movement succeed in their mission to
leave the Eurozone, there would be nothing stopping a tide of
withdrawals from other countries, tired of constant dragooning by Brussels
and Germany.
This is certainly coming
from the far-right. The leader of Lega, Matteo Salvini, told the press last
week: Italy wasn’t a “colony”, and that “we won’t have Germany tell
us what to do”. Parties of Salvini’s kind are not uncommon across
the rest of Europe — increasing the potential for fragmentation and leading to
what some – including the former chief of Britain’s defence staff Lord
Bramall – see as a real risk of the structure unravelling.
Indeed, a study published this week by the
Washington-based Pew Research Center showed public support for the EU had
fallen sharply across its largest member states over the past year.
The New York
Times Economic Observer Neil
Finn has warned us not to be too expectant of change. In an article
following the crash he expressed his own doubts about the "contagious effect" of the Italian political
crisis; reminding his readers that Italy is "the third-largest economy
in the Eurozone (and fourth largest in Europe, after Germany,
Britain and France), with one of the biggest piles of public debt
in the world," predicting that "a crisis there could endanger
banks and investment portfolios everywhere." What he was really
saying was, Italy’s fate is already far too invested in Europe to leave.
Rome potentially
dropping the euro as the state currency would devalue all Italian
government bonds in European banks, inflicting huge damage on the
European finance sector. According to some estimates, even if the EU
economic institutions manage to sell off a large portion of the
Italian national debt, their losses would amount to billions of euros
– a precondition for a second global financial crisis.
Il
capo
So opinions vary. But we
must not disregard the President. Sergio Mattarella's vetoing of
an Eurosceptic economist as the
proposed finance minister was a big call. His
move shows that Italy's head of state, while predominantly a
governor-general figure rather than a president in the American sense, is
willing to have a go at riding the populists out.
Luigi Di Maio, the Five
Star front-runner, and Salvini of the League, have brought the President under
intense scrutiny, accusing him of acting too politically when his role is
supposed to be neutral.
But if Europe is to
retain one of its founding members, after all – the initial European Treaty was
signed in Rome, he will have to let his views be known.
At a press conference
following Giuseppe Conte's (the populist’s pick for premier and an Eurosceptic)
initial resignation, Mattarella declared that the two parties wanted to bring
Italy out of the Eurozone and that as the guarantor of the Italian
Constitution and the country's interest and stability, he could not allow Conte
to take the lead.
A self-proclaimed liberal,
he has an important part to play in deciding Italy's future within the EU. And
he is turning out to be
more influential than perhaps the failed coalition
hoped. For those in Brussels, this may prove essential.
So while chaos is the
norm in Italian politics, it may be that centrist Italian voters, unsettled by
yet more turmoil, will head back to more traditional parties — contrary to what
the latest polling suggests.
We are expecting to see fresh elections as early as August or as late as
early next year. The Five Star Movement took the largest proportion of the vote
in the last election, not the least because of their anti-establishment
outlook. So despite his desire to remain within the Eurozone, and the EU,
Sergio Mattarella cannot fight the Italian people.
Consequently, the reply
from most liberals to the turmoil in Europe is the same as to most politics at
the moment: we’ll just have to wait and see.
