speri.comment: the political economy blog

Italy after the referendum: when change leads to immobility

A month after the Italian constitutional referendum and nothing has really changed. The country has a new government and Prime Minister, yet the political and significant economic challenges remain

Dr Arianna Giovannini, Honorary Research Fellow, SPERI and Lecturer in Local Politics at the Department of Politics and Public Policy, De Montfort University (DMU)

Ariana GiovanniniAfter the resounding No vote returned by the Italian electorate on December 4th, the former Prime Minister Matteo Renzi, who staked his future on the outcome of the constitutional reform referendum by conducting a highly personalised campaign, tendered his resignation. Normally the resignation of the PM would trigger a general election but for the President of the Republic, Sergio Mattarella, this was never an option.  Mattarella instead gave a mandate to Paolo Gentiloni to form a new government, which was set in place on December 9th with the primary aim of addressing the country’s ‘double electoral law’ issue and, only once resolved, could Italy go to the polls.  By Italian standards, this was a remarkably swift transition between governments—but it came with a strong sense of déjà-vu and with the feeling that, if anything, such a shift ushered in continuity rather than change.

The double electoral law issue that the country is currently facing is a by-product of the referendum result. Whilst a new electoral law (the Italicum) has been in place for the Chamber of Deputies since 2015, this was conceived by Renzi’s government to work in tandem with the constitutional reform that, among other things, aimed to change the role of the Senate (turning it into an indirectly elected chamber of representatives from regional and local authorities), but did not pass in the referendum.  Renzi did not devise any Plan-B to deal with such a scenario—thus Italy is now left with two incompatible electoral systems for the upper and lower chambers of the parliament.  In practice, this is a perfect recipe for legislative gridlock, as different parties or coalitions could end up gaining a majority in each chamber—the worst scenario that Italy, or any other liberal democracy, could wish for.

The result of the referendum should not be oversimplified as yet another ‘expression of populism’, nor was it just about the proposed constitutional reforms. With their vote, Italians conveyed a profound discontent against a range of issues: the proposed changes to the constitution; the political establishment and its myopic interests; and, above all, the widespread economic crisis that has afflicted the country for decades.  The electorate, therefore, ‘punished’ the government and the referendum turned, in many respects, into an opportunity to express a verdict on Renzi and his executive, perceived by voters as having failed to address the deep-seated economic and social problems they promised to solve.  And yet, paradoxically, Gentiloni’s new government seems to be a refitted version of what the Italian electorate rejected: the new administration has a similar outlook and faces the same challenges.

Firstly, the ‘new’ cabinet is almost a perfect carbon copy of Renzi’s government, as is the parliamentary majority supporting it. There has not been any major change in the top ministerial positions, and the political balance that kept together the previous broad coalition remains untouched.  Renzi might have resigned as PM, but his shadow still lurks in the background of Gentiloni’s cabinet.  Importantly, Renzi has kept his position as leader of the Democratic Party (PD) and it could be argued that the former premier is using this situation to ‘buy the time’ necessary to regain political consensus, and possibly turn the PD into his own ‘personal party’ ahead of the next general election, whilst acting as a back-seat driver for the new government.

Secondly, under Gentiloni’s lead the country is still dealing with the same political, institutional and economic issues that his predecessor faced. In political terms, in the aftermath of the vote the party system continues to be factious.  The composite nature of the ‘No’ front means that the forces that gained over 60% in the referendum have not found a univocal voice.  The debate on the electoral law is a clear example of this.  Whilst President Mattarella keeps calling for a moderate cross-party discussion so as to settle the issue swiftly and move on to fresh elections, each party keeps ‘shouting and demanding’ in an attempt to capitalise on the current situation.  Some (the PD, the Northern League) call for a return to the mixed system adopted between 1993 and 2005; others (Berlusconi’s Forza Italia) want a pure proportional system; whilst, in an unexpected turn, the Five Star Movement is now supporting a revised version of Renzi’s Italicum for both chambers.  In the absence of consensus, it is likely that a decision will be reached only after the Constitutional Court delivers its sentence on the current system on January 22nd.  Thus, in spite of the clear message of discontent towards the establishment sent by the electorate, Italian politics is business as usual, under new management.

Similarly, Gentiloni does not seem to be in a hurry to pass the baton onto a new PM. In his confidence speech to the parliament, the new premier stated that his cabinet will not only focus on the electoral law, but will also carry forward the programme of reforms initiated by Renzi.  This suggests that, once again in the face of the referendum outcome, the administration led by Gentiloni’s is not simply a ‘government of purpose’ and that a general election may not be looming.  Indeed, the vote could be postponed until the end of the parliamentary mandate in 2018, or at least until the autumn of 2017.  This apparent unwillingness to push for an election and bring about change could have a strongly negative effect on the electorate’s mood, and fuel anti-politics stances.

On top of this, the most difficult issue, of course, remains the Italian economy. The country is afflicted by a range of entrenched economic problems: sluggish growth, low productivity, high levels of taxation, dramatic levels of unemployment (especially amongst younger generations and in the South), and a very fragile banking system. In December, Monte dei Paschi (MPS), Italy’s third-largest bank, declared that it was not able to achieve the €5 billion capital increase (subsequently raised to €8.8 billion) by the year-end which was requested by the European Central Bank following the result of their July 2016 ‘stress test’. The referendum result had an impact on this: major investors ‘vanished’, and political instability added further uncertainty.  State intervention became imperative: on December 21st, the government authorised an increase (up to €20 billion, 1.2% of GDP) in the public sector borrowing limit, to provide capital support to Italian banks.  Soon after, it also passed a decree to aid the banking sector by providing capital and liquidity.  MPS is to be the first beneficiary of these measures, but many other Italian banks are in troubled waters too.  Thus, it remains unclear whether such public intervention in the banking sector will be enough to achieve real financial stability.

There are also other key questions that still need an answer, such as the stability of Italy’s sovereign debt markets, the migrant crisis, and the country’s relationship with the EU. Economic instability is the issue that affects Italian citizens in their everyday lives—and, as shown by the referendum result, political elites are clearly seen as responsible for this.  Thus, Gentiloni faces the double task of addressing these problems and (re)creating confidence among an electorate that profoundly distrusts traditional politics—in effect he faces the task of taming a further anti-politics wave.  Renzi himself tried and failed, and it is hard to imagine how Gentiloni, a leader with much less political leverage and boldness, will be able to bridge this crucial cleavage in a short period of time.  If Italy was to enter another phase of recession, the consequences for the political system could be disastrous.

As argued by Bordignon, much of Italy’s future was at stake with the referendum. The vote offered an opportunity to introduce a profound change in the functioning of Italian politics (whether for better or worse, we will never know), possibly paving the way towards a nascent Third Republic.  However, Italians did not trust ‘the establishment’ epitomised by Renzi, and rejected this.  They wanted real change.  Alas, what they got instead so far is more of the same: political, institutional and economic immobility.  What the political class seems to underestimate is that, in the current climate, turning a deaf ear to the electorate, once again, could be very dangerous: they risk generating a Pandora’s box filled with anti-politics feelings that will be opened at the next general election.

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