Italy’s Prime Minister Matteo Renzi is in big trouble. After transforming an upcoming referendum – date still unknown – into a pro or anti Renzi vote, he’s discovered that not as many people like him as he hoped. I read an article in Italian on Mr Renzi which stated that there are those who want him dead, figuratively speaking, and others consider he’s dead already.
The upcoming referendum could be Mr Renzi’s death warrant. If Mr Renzi loses the referendum which is supposed to make future Italian governments more stable, he’s promised to go – though he may go back on his word. If he does go, Italy will be rudderless and in the post-Brexit world, this could cause big problems in Europe, if not globally.
Adding to Italy’s Prime Minister’s woes is the fact that his reforms are not really making any difference. The number of jobless in Italy remains stubbornly high and the precariat – those without stable employment – is growing once more.
While Italy’s economy is recovering, the recovery is not taking place as quickly as Mr Renzi promised it would. Indeed, Mr Renzi promised a recovery with a bang from September 2014. September 2016 is not far off and Italy is still waiting for the bang promised in 2014 to happen.
Another of Italy’s premier’s enthusiastic promises was that he was going to sort Italy out in 100 days. Everybody in Italy laughed at this promise and laughed even more when the 100 days became 1,000. Mr Renzi’s credibility took a beating.
What also might contribute to Mr Renzi’s political death is the curious situation of Italy’s banks.
Italy’s Banks Are Solid – Except, They Aren’t
Both Mr Renzi and his Economy Minister Mr Padoan have insisted repeatedly that Italy’s banks are solid. Despite their supposed solidity, some of Italy’s banks have required highly unpopular bail-ins and there’s now talk of billions being thrown at a full blown bail-out. If this happens, and it looks as though it might, Mr Renzi’s popularity will sink even further.
Now why would solid banks need cash? Perhaps because they are not really solid at all. A problem with around €360 billion in bad loans is causing concerns. Then there’s a forthcoming stress test that may present even worse news on the solidity front for Italy’s many hundreds of little banks.
Clearing the bad loans are proving problematic owing to a vicious combination of Italy’s snail’s pace slow legal system and complex bankruptcy laws. The bad bank solution used by other nations to sort out banking system instability cannot work quickly enough in Italy.
Curiously, it looks as if Europe is keen for Mr Renzi to push ahead with a bank bail-out even if its own rules forbid the use of public money. The reason for this change of heart appears to be a fear by Europe’s elite that the Five Star Movement may win control of Italy. However, a full blown bank bail-out may well be precisely what propels the Five Star Movement into power.
Others fear that the collapse of Italy’s banks could start a domino effect which might affect both Europe’s economy, if not that of the world. Yes, the spotlight is well and truly on Italy, as it was before Silvio Berlusconi was forced to resign. Will Mr Renzi face the same fate?
The Cause of Italy’s Bank System Crisis
Ironically, the culprits behind the instability of Italy’s banking system may well be those who want to save it now. Italy’s politicians, you see, use Italy’s banks to bolster their power. Play nice and get finance. Except loans have been dished out to friends of politicians more less on the word of party officials – forget creditworthiness and other logical checks. A sizeable chunk of these ‘friendship’ loans have now gone sour.
Italy’s nearly bankrupt Monte Paschi di Siena bank was reputedly used by politicians as a form of treasure chest, only the treasure has long since disappeared. A bail-out should fill up the coffers again, though.
Even if the prospective bail-out works, it won’t remove the root cause of the issue – political interference in the running of Italy’s banks.
If another bank salvage mission does occur, the senate reform referendum is even more likely to centre around a “Yes, Mr Renzi, please stay” or a “No, Mr Renzi, please go” vote. To keep himself afloat, Italy’s embattled prime minister is said to be considering moving the date of the referendum to 2017.
Pacts with Devils
As well as Italy’s banking system issues, Mr Renzi has self-harmed by making and extending pacts between his left-leaning PD party and Italy’s centre-right. Mr Renzi may now have woken up to the fact that all these alliances, such as the one with former Berlusconi crony Denis Verdini, may not have been such a good idea.
Another of these pacts risks collapsing too. The NCD, a Berlusconi spin-off party which is run by Interior Minister Angelino Alfano, a one time pretender to the Berlusconi throne, has been rocked by revelations that Alfano has allegedly been dishing out well-paid jobs to his friends. There are also investigations, in which Mr Alfano’s name has come up, into what amounts to an attempt to plant malware within Italy’s justice system’s IT infrastructure.
Still, poor Mr Renzi had little option but to make pacts with devils. Without them his government wouldn’t have been able to pass any reforms at all. However, with the unholy alliances, the reforms that have been passed have been watered down. Mr Renzi was forced to weaken the reforms to keep his alliance partners content and to ensure his government continued. Consequently, Italy has not been able to drag itself out of recession as fast as perhaps it could have done.
Renzi’s Five Star Bashing in Rome and Turin
That these curious if inevitable alliances have alienated Italians who traditionally voted for Italy’s left became starkly clear during recent local elections. The anti-establishment but Italian constitution loving Five Star Movement swept to landslide victories in Turin and, more significantly, in Italy’s capital, Rome. These victories have reputedly panicked Mr Renzi. They also led to calls from within his party for him to stand down as party secretary. Mr Renzi, Corbyn-like, refused.
As a result of the loss of Rome, Italy’s Prime Minister can no longer count on the support of all those in his party when it comes to the “We Love” stroke “We hate Renzi” referendum on rejigging Italy’s parliament. Arguably perhaps, Mr Renzi lost the support of quite a number of those in his party when he became friends with Mr Berlusconi’s mob.
Talkative Mr Renzi
Mr Renzi talked his way into power – he wasn’t elected – on claims that he’d scrap the old and bring in the new. Italy’s self proclaimed “demolition man” also promised to work miracles with regard to Italy’s lagging economy. He hasn’t fulfilled either of these grand promises.
As it happens, Italy’s rhetoric-loving premier has scrapped very little and continual corruption scandals suggest that many of Italy’s establishment politicos have little if any intention of turning over a new leaf.
The wind just isn’t blowing in Mr Renzi’s direction at all. If the senate reform referendum actually passes, it’ll be a good old fashioned miracle. Then again, other miracles may happen in the meantime and they might brush up Mr Renzi’s battered image. On the other hand, even more scandals may surface and these may cause Mr Renzi to sink even further into the brown and smelly stuff. Well, he did jump into the cesspool with his eyes wide open. Such is political life in Italy.
Meanwhile, tax levels remain eye-wateringly high and Italy’s national debt continues to climb. Oh, and VAT is likely to go up too – yet another nail in Mr Renzi’s largely self-crafted political coffin. The situation is almost as messy as it is in post-Brexit Britain.
Please note that some links go to articles written in Italian.
Photo of Matteo Renzi by Roberto Vicario