Matteo Renzi, Italy’s latest unelected prime minister, swept into power on big promises to turn Italy round. He brushed aside his predecessor Enrico Letta and grasped the reins of the wobbly old horse that is Italy. The spin flew from Renzi’s lips – reforms in 100 days was one of his more memorable claims. The 100 days then became 1,000. The spin continues.
The international community, while uncertain inexperienced Renzi would prove the solution to Italy’s woes, initially welcomed the new face and hoped that he would live up to all his magnificent promises. Renzi had never before run anything bigger than the Italian tourist honeypot city of Florence, hence the uncertainly that Renzi could solve Italy’s problems.
Grim GDP figures appeared at the start of August
Far from healing economically GDP data showed Italy had slipped into another recession while Renzi was in the driving seat. Arguably, what is now considered to be a triple dip recession is really a sign that Italy’s economy is fast heading for depression, as it has been, slowly but surely, since 1980.
Italy couldn’t keep up with the times and its economic position has been weakened by the emergence of new economies but Italy did nothing to counter the effects of the change in the economic landscape of the world. The Boot needed deep rooted structural reforms, and, as some are arguing today, including Raffaele Cantone, Italy’s new anti-corruption Czar, a cultural shift to set itself upon the rails one more. The cultural shift process should have been initiated years ago, yet Italy’s leaders never bothered pointing the nation in a better direction. If anything, they did the opposite.
Italy’s Extractive Classes Run Renzi
Renzi, despite all his pretty spin, is proving to be yet another Italian leader who is ruling for the nation’s “extractive classes” and, as has always been the case, Italy is suffering. Not only does GDP data indicate this, the continual growth of the nation’s massive national debt during Renzi’s short reign demonstrates that what whatever Renzi’s strategy is, if indeed he has one, it is simply not working. The European Central Bank noticed this and called for reforms. Europe has criticised Italy’s poor administrative capacity and absence of a concrete strategy. In short, it is now looking as if Renzi is all show and no go.
Not helping matters is Renzi’s insistence that Italy will continue to go its own way and will not be dictated to by external forces. Italy’s ‘own way’ since 1980 has not proven to be much more than a disaster – ask Italy’s jobless youth and those Italians who have fled Italy for friendlier climes.
Renzi’s decision to prioritise institutional reforms over structural reforms appears to have been a major policy error though Renzi may not have had much say in the matter. Without the support of Italy’s other political parties, Renzi can’t do much if anything to repair Italy. Such support is subject to terms which threaten to render the reform process a complete waste of time, alas.
No Christmas Cake for Renzi
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Ex-comic turned political leader Beppe Grillo ran an article on his blog claiming that Renzi would not eat panettone. Panettone is Italian Christmas cake. In other words, Grillo is claiming Renzi won’t last until Christmas. Grillo suspects that the initial enthusiasm of the international community for Renzi is fast transforming into the belief that he is a liability. A similar belief reportedly led to the downfall of one Silvio Berlusconi back in late 2011. Will Matteo Renzi come to the same sticky end? He is trying not to.
Recently, Renzi met with ECB head Mario Draghi. Aside from Renzi’s comments he often meets Draghi and that everything is OK, the details of the unscheduled meeting have not been made public. Soon after, Renzi met Italy’s president Napolitano. No doubt Renzi is attempting to extricate himself from the excrement he is now in. And he’s in the brown and smelly stuff up to his neck.
Part of Renzi’s grand plan – which the EU doesn’t think is overly grand – for kick-starting Italy’s economy is to initiate a massive public spending programme, only the funding for this manoeuvre was supposed to have come from what has proven to be an erroneous estimation of Italy’s GDP growth. Instead of growing, GDP fell. Everyone is now waiting to see what solution to this problem Renzi will announce in the coming weeks, if not days.
A Technical Shadow Looms Large
If Renzi does not manage to come up with a convincing proposal, then he may well be displaced by another technical government.
Who would lead such a government? Now that is a very good question. Italy has run out of candidates. There is, however, Carlo Cottarelli, the man from the IMF, who has carried out a public spending review, the recommendations of which Renzi has largely chosen to ignore.
While Italy’s extractive classes would never agree to Carlo Cottarelli being nominated as a technical prime minister, external forces just might impose Cottarelli upon Italy. We’ll see.
Euro Zone Woes Add to Renzi’s Troubles
Making matters even worse for Matteo Renzi is new data which shows that the Eurozone is still nowhere near on the road towards economic recovery. France is in trouble and the fallout has spread to the mighty Germany too. Uncertainly over Italy’s plans for the future are causing to the Italian bond – German Bund spread to rise. The risk of contagion appears to be raising its ugly head once more. If the rise accelerates, Renzi’s troubles will too. Will he be able to spin himself out of trouble?
Italy is Not Florence
Italy’s prime minister and former mayor of Florence Matteo Renzi is finding out the hard way that running a troubled nation of 60 million people is nowhere near as easy as running a city which is a world renown tourist destination with a population of just under 370,000.
We shall learn in the next few weeks whether or not Matteo Renzi will get his Christmas cake.