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Italy’s Matteo Renzi – Snake Oil Salesman or Saviour?

Trying to work out whether Italy’s current prime minister Matteo Renzi is one of the good guys or one of the bad guys is not easy.

So far, his track record has been far from stunning. Since Mr Renzi took Italy’s driving seat the nation has entered a third recession and deflation has arrived. Unemployment continues to rise, consumer spending is falling and businesses are shutting down daily. Mr Renzi’s promises to scrap the old, defective system haven’t come to anything either.

Understandably, Italians are beginning to doubt Mr Renzi’s credibility. He’s been accused of ‘announcementitus‘ – continually making announcements which are not supported by actions – an accusation he fended off with, yes, you guessed it, yet another announcement.

The European Union worries that Italy lacks strategy – this also casts doubts over the quality or Mr Renzi’s leadership though Italy’s governments have never been known for strategy and planning. Well, few seem to last for much more than a year or so anyway. They know this so probably regard long term planning as a waste of time. Italy’s economy has suffered as a consequence of government instability and lack of direction.

Despite Mr Renzi’s continual announcements of deep seated reforms none have appeared. On top of this, cuts recommended by one Carlo Cottarelli which could save spendthrift Italy billions and help fund reforms are not being implemented. Indeed, Mr Cottarelli’s recommendations are being virtually ignored or blocked by Italy’s powerful political and economic cliques.

Today, Italy’s press is carrying stories of €20 billion of cuts and education system reforms. Will they really happen?

Chicken and Rooster with the ECB

As well as ignoring Mr Cottarelli, Mr Renzi has been playing chicken and rooster with European Central Bank head, Mario Draghi. Mr Draghi wants Italy to pass reforms before he wades in with quantitative easing in what may well be a last ditch attempt to save Italy and Eurozone’s economies from the abyss. Only, and as Mr Daghi well knows, quantitative easing stands even less of a chance of working if it is not supported by reforms.

For reasons which are not exactly clear, Mr Renzi appears to want a quantitative easing helping hand from the ECB but does not want the assistance to be tied to reform commitments. Promises of reforms from Italy are not enough seeing as Italy’s politicians repeatedly go back on their words which is something else Mr Draghi will be well aware of. This could be why Mr Draghi wants to see reforms before he offers Italy help. Mr Renzi wants the help regardless of reforms.

The economic situation in the whole of the Eurozone has now taken a turn for the worse, so Mr Draghi may well be forced to implement quantitative easing before Italy carries out any real reforms. Mr Renzi appears to be aware of this and may well be delaying reforms in the hope that ECB help will arrive in the near future.

Why All the Promises?

Why has Mr Renzi been promising reforms if he’s apparently doing everything in his power to avoid them? One reason is that Italy does not have the money to implement reforms (although it would have some if Mr Renzi listened to Mr Cottarelli). Another reason is probably that Mr Renzi knows that with the political climate that exists in Italy, the chances of pushing deep seated reforms through lie on the wrong side of zero. Both of Mr Renzi’s predecessors promised reforms, both got virtually nowhere.

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The reason for Mr Renzi’s reluctance to pass reforms may well be that Italy’s extractive and other controlling elites realise that reforms could change the balance of power in Italy. This is the last thing they want to happen. Moreover, Mr Renzi knows that keeping Italy largely as it is will keep him in power. This could be why he is so unwilling to tackle Italy’s lobbies – he knows they can keep him where he is and will, on the condition that reforms never happen. However, by continually promising reforms, Mr Renzi can maintain popular support. While Mr Renzi does not need to carry out any real reforms to keep himself in power, he does have to keep giving the impression that eventually they will happen even if, most likely, they will not.

If this is his strategy, then Mr Renzi has placed his money on Italy’s economy recovering naturally over time. This may happen, eventually, then again, it may not. For Mr Renzi, the risk is worth taking even if in the meantime, Italy’s economy will continue to nosedive. To keep the populace content, carrots, such as €80 handouts and continual promises of reforms will be provided. It’s the spin, delay, and pray approach I’ve mentioned before. The vast majority of Italians fall for this every time, others have simply been leaving Italy. Very well heeled Italians have been buying up property in London.

You can see where this is going: Italy is not going to reform itself, well, probably not in the hands of Mr Renzi. I could be wrong, of course.

Murky Waters

To be fair to Mr Renzi, he’s trying to negotiate the murky waters of Italian politics which has long been in league with powerful lobbies and other interest groups. So far, though, his negotiating has not got anywhere. His negotiations, though, could be not much more than a carefully contrived charade, much like the reform promises.

That Mr Renzi may be pandering to Italy’s entrenched interest groups is evidenced by the recent and much trumpeted Unblock Italy economic stimulus measures. These appear to have been tailor made for Italy’s powerful construction lobby which, it has to be said, is often infiltrated by organised crime. Italy’s politicians seem to be in league with both. One of the reasons why the Milan Expo 2015 works are behind schedule is that the mafia has been merrily tinkering with building contracts.

This is nothing new in Italy and at least Mr Renzi has appointed anti-mafia magistrate Raffaele Cantone to investigate corruption. But will Cantone really be allowed to make a difference? Or is he merely a token?

Mr Real, or Mr Fake?

While Mr Renzi says he wants to extricate Italy from the hands of its many extractive lobbies, is this really the case? Or is it merely rhetoric while, in the background, Mr Renzi works to reinforce the position of Italy’s extractive political classes and lobbies.

The in-progress senate reform does appear to play into the hands of Italy’s extractive elite and the new senators will enjoy the same extraordinarily high level of immunity from prosecution as their colleagues in Italy’s lower house of parliament.  With enough votes from their colleagues, criminally inclined Italian parliamentarians can keep themselves free to walk the streets of Italy virtually indefinitely. In the past, Mr Renzi claimed that reintroducing immunity would be a enormous error, yet it happened.

In support of the theory that Mr Renzi is merely working to ensure Italy never changes, is his vicinity to Berlusconi crony, one Denis Verdini, a man suspected of links to the so-called P3 which, like its mysterious predecessor, the P2, wants to deliver Italy into the hands of a corrupt elite. Verdini, who is facing charges of corruption, played a key role in the brokering of the mysterious deal between convict Silvio Berlusconi and Matteo Renzi – the Pact of Nazareno.

Arguably, Italy is already in the hands of a corrupt elite as the title of the book by mafia export John Dickie strongly suggests. The title of the book is: Mafia Republic.

Is Matteo Renzi part of that same corrupt elite? Or is he Italy’s saviour? What do you think?

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