Matteo Renzi has put Italy's future—and that of the euro—at stake in a referendumby / November 18, 2016 / Leave a comment
Published in December 2016 issue of Prospect Magazine
A time-bomb is ticking away in the heart of Europe, carrying a label marked “Made in Italy.” It could yet be defused. But if it goes off, it would make Brexit look like a lot of fuss about nothing.
The time-bomb has been laid by Italy’s young, reformist Prime Minister, Matteo Renzi. The potential trigger is the referendum he has called for 4th December on reforms to the country’s constitution. The explosive content is that his fiercest and strongest opposition, the Five Star Movement, is also young, reformist, and wants a referendum held on Italy’s membership of the euro. And it is running neck and neck with Renzi’s party in national polls.
The stakes couldn’t be higher. Populism and Euroscepticism are all the rage, throughout Europe. But that matters most when a party pursuing such anti-establishment goals has a serious chance of entering government. That is where Italy comes in: if a general election were held tomorrow, the Five Star Movement would have a serious chance of winning. If it were to do so, the mere hint of a referendum on the euro would send financial markets haywire.
A general election does not have to be held tomorrow: the next one is not due until 2018. However, that is not far away, and an early election is conceivable if Renzi were to lose his referendum.
On the arguments, he doesn’t deserve to do so. The December referendum—which is required under Italy’s constitution—concerns a set of changes to the country’s political institutions that are designed to make it more governable, and to open the way to liberalising, pro-growth reforms that are long overdue.
Quite reasonably, Renzi proposes to abolish the elected upper house, the Senate, and replace it with a house with reduced powers made up of nominees from regional assemblies. Until now, the Senate has held identical powers to Italy’s lower house, but generally with a differing political complexion, so it has blocked many major reforms.
Renzi also proposes, again quite reasonably, to abolish one of the country’s four layers of government, the provinces, which lie between cities and regions and simply reinforce the country’s susceptibility to corruption. Moreover he wants to shift decisions over major items of infrastructure up from lower levels of government to national level, to make them less prone to blockage by local interest groups.
Italy is a country which passes an abundance of laws, but fairly few of which make a real difference to policy or society. Renzi wants to change that. The trouble is, that in order to do so he wants to make his own office, the prime ministership, more powerful. The referendum will also encompass a new electoral law for the lower house, the Chamber of Deputies, designed to ensure the country has strong governments by handing out a bonus of extra seats to whichever party comes top in an election.
It makes sense in theory. But in practice this, in combination with the Senate’s abolition, will greatly reduce the checks and balances in place. This raises fear of a new Mussolini coming to power. Perhaps, ill-wishers think, that could be Renzi himself. Or it could be the Five Star Movement.
The referendum is complicated and raises plenty of causes for concern. But the background to it is worse. Italy has been the worst-performing euro-area economy since the 2008 crash, barring Greece. Nothing Renzi has done has changed that. The economy is still bumping along the bottom, with unemployment above 10 per cent of the workforce and incomes flat or falling.
No wonder he is not popular, especially in his own party, and no wonder that current polls imply he will lose the referendum. Before the summer, he recklessly promised he would leave politics if he loses in December, a promise he has since tried to wriggle away from.
Whatever his view, the choice may not be his. When he entered office in February 2014, it was by a party coup, in which he unseated his predecessor, Enrico Letta, without a general election. The same could happen to him, after 4th December. The first aim would be to replace him with a safe, technocratic prime minister. But a general election could soon become unavoidable.
The risks to Europe and to the world are huge. The Five Star Movement is not a party of far-right devils along the lines of France’s Front National, nor of Donald Trump. It is peopled by young professionals desperate to drive out corruption and renew their country. It deserves sympathy and support. But it is a party without coherent policies or organisation, led by a comedian, Beppe Grillo, and driven by naïve dreams of internet-based participatory democracy.
Those dreams have already been exposed as mere chaos by the Five Star mayor of Rome, Veronica Raggi, elected in May and who so far has failed even to form a full council, let alone to carry out any reforms. This has not yet had a noticeable impact on Five Star’s national polling. That is because it is a pure protest movement, against the establishment of which even the young Renzi forms a part. Five Star remains strong because Italy has, so far, proved immune to radical change.
There is still time for Renzi to defuse this time-bomb. To do so, he would need to convince his country that he is the one who can bring radical, prosperity-enhancing change. Most of all, though, he needs to reform his own constitutional reforms, altering the electoral law proposal to make it less prone to bring to power a new Mussolini. We all know how he ended up.