Italy: Government crisis could stifle recovery

Rome, Brussels If there is one thing Italy cannot afford at the moment, it is a crippling power vacuum: a nine percent economic slump, national debt rises to one and a half times economic output, companies are unproductive, health and education systems are underfinanced. But Italy’s ex-prime minister Matteo Renzi has now pushed his country into this power vacuum when he left the ruling coalition with his small party Italia Viva.

Prime Minister Giuseppe Conte tries to avoid new elections, speaks to possible new supporters who could secure him a majority in the Italian parliament. Renzi and his two ministers terminated the alliance with the Social Democrats and the Five Star Movement on Wednesday evening because they could not agree on the amount and use of the European aid money, which Italy’s economy urgently needs. The payment of the same aid could now be delayed considerably.

There is now also a big question mark behind the next national Corona aid package for companies particularly affected by the pandemic. The companies that were already hard hit would suffer. The companies had hoped for a quick upswing after the sharp slump last year. That could now be strangled by political squabbles. Even the specter of new elections is already haunted, which could bring the country a broad right-wing majority – with the League of ex-Interior Minister Matteo Salvini as leader.

“The clock is ticking for Italy,” says Markus Ferber, economic policy spokesman for the EPP group in the European Parliament. The later Rome submits a satisfactory development plan to Brussels, the longer it will take for the funds to arrive in Italy – “those responsible in the Italian government should be aware of this”.

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There is great concern in the EU about the break in the coalition. “Especially in the pandemic it is important that Italy has a government capable of acting,” says the CSU politician.

Debts grow by 22 million euros – per hour

The political crisis hits Italy in an economically extremely fragile phase. The country has still not recovered from the euro crisis in more than ten years. According to estimates by the International Monetary Fund (IMF), Italy’s economic strength will not have reached the pre-crisis level of 2008 even in 2025.

The national debt has stubbornly stuck to around 135 percent of economic output in recent years. None of the governments has managed to get down from the huge mountain of debt, which is now over 2.5 trillion euros.

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Then came the pandemic. Debt grows and grows – currently by 22 million euros per hour. As a result of the corona crisis, it will rise to more than 160 percent of gross domestic product, the IMF estimates. Italy would soon be playing in a league with countries like Eritrea and Lebanon. In Europe only the Greeks exceed this debt level.

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The eighth largest economy in the world was hit particularly hard by Corona. More than 80,000 people have died from or with the virus. In relation to the number of inhabitants, only Belgium has an even higher death rate worldwide. The military vehicles that transported coffins en masse through Lombardy in the spring are etched into the country’s memory forever.

The lockdown that Premier Conte imposed for more than two months in March was one of the toughest in Europe – including a production freeze for most companies. The manufacturing industry has recovered to some extent and is optimistic about the coming months.

Tourism, which normally contributes a good 14 percent to the gross domestic product with its suppliers, almost came to a standstill last year. The industry association Federturismo is assuming a decline in sales of 80 percent compared to the previous year for hotels alone.

Due to the political quarrels, the payment of what is now the fifth Corona aid package for industries particularly suffering from the pandemic could be delayed. The government wants to adopt a supplementary budget for this, around 24 billion more than previously are planned, including for the procurement of further vaccines. However, experts assume that a resigned government would no longer be able to propose such a large sum to parliament.

The great hope rests on further vaccines

Italy’s economy contracted sharply last year. The latest estimates assume a minus of almost nine percent. For this year, the economists from the statistical institute Istat expect a plus of four percent. However, the unemployment rate is also expected to rise, from 9.4 to eleven percent.

One of the reasons for this: In April, the cancellation ban imposed by the government at the beginning of the pandemic expires. After all, private consumption makes optimistic: While the Italians initially put their money aside during the crisis and drove the savings rate of private households to 19 percent at times, they have been spending more again since September. The stricter corona regulations in winter mainly affect retailers again.

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The corona vaccinations started at least give hope that the pandemic will end soon. Italy wants all its citizens to be immunized by autumn. This calculation will only work if the vaccine candidates from Astra-Zeneca and Johnson & Johnson are also approved in the summer. There are many uncertainties, to which the political one is now added.

“The current economic situation in Italy is characterized by the pandemic and uncertainty about the future”, says Jörg Buck, head of the German-Italian Chamber of Commerce in Milan. “What our companies need now is a strategy for the reconstruction plan and its implementation so that Italy and its European partners, especially Germany, can return to growth.”

Italy urgently needs the money from Brussels to tackle decades-old problems: the health system is just as underfunded as education. Business productivity is far too low. The administration works too inefficiently and too analog. Italy ranks at the bottom of the Digital Economy and Society Index, only ahead of Romania, Greece and Bulgaria. Digital signatures are hardly possible, there is a lot of paperwork at the offices.

The judiciary works too slowly, and many processes simply become statute-barred. At the same time, youth unemployment is almost 30 percent.

Renzi flashed a glimmer of hope

“Without national plans, which reforms are to be financed with 200 billion EU funds in Italy, and appropriate controls, no money can flow,” warns Andreas Schieder, head of the Austrian Social Democrats delegation in the European Parliament.

It is worrying for the entire Union if a country like Italy cannot benefit from the gigantic aid program – “and so falls behind in the reconstruction”. The inadequate productivity rates could not be remedied by European monetary and fiscal policy alone, warns the FDP MEP Moritz Körner.

Renzi let through at least one glimmer of hope, despite all the dissent: As soon as the government’s reconstruction plan is voted on, his party Italia Viva would vote in favor. It will soon become clear whether Prime Minister Conte can really still trust his old partner: the use of EU aid will be debated in parliament on Monday.

Italy has proven over decades that it has always been able to spend EU money despite regular government crises, says MEP Körner. But even if Parliament were to wave through the spending list, there is fear in Italy that Brussels will not be able to pay off in the middle of a vacuum.

More: Italy must avoid new elections at all costs – one comment

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Italy’s Prime Minister Conte must avoid new elections

Italian Premier Giuseppe Conte

If the non-party Conte wants to prevent new elections, he must quickly find new supporters in parliament. Italia Viva provides 25 of the 630 parliamentarians in the lower house and 18 of the 315 senators.

(Photo: Reuters)

Rom Matteo Renzi has to endure a lot of malice on Twitter. Under the hashtag #Renzivergogna (in German: Renzi Schande), the 46-year-old is shown either as a riot in the US Capitol or as a baby with building blocks – which are not from Lego, but from “L’ego” – Italian for “the ego “.

The former prime minister has dominated Italian politics for weeks: with threats, ultimatums and personal attacks on his successor Giuseppe Conte. It is still a mystery what the leader of the dwarf party Italia Viva actually wants. What is clear is only what he does not want: to continue to support the current government. On Wednesday evening, Renzi dropped his political bomb – and withdrew his two ministers from the cabinet after the dispute over EU aid. In the middle of the health crisis, which has already caused almost 80,000 corona deaths, Renzi is now giving the country a political one.

The current situation is difficult to convey to the Italian people. According to a survey by the polling institute Ipsos, 46 percent of citizens do not understand the government crisis. 73 percent of those surveyed believe that Renzi is only pursuing his personal interests – or those of his party. Just 13 percent think that the ex-prime minister is acting in the interests of the country.

The senator from Florence was right in his criticism of the content: Italy’s first draft for the EU reconstruction fund was not very ambitious, included too many old projects, and had no clear focus on investments. The new version that the cabinet decided after Renzi’s Christmas threats is definitely the better one. Renzi could have booked that as a success. But he bit into the European Stability Mechanism (ESM), the billions of which he wanted to tap for the health system. It was clear from the start that the co-governing five-star movement would not move away from its no to the ESM.

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Right block at 46 percent

Prime Minister Conte now has to find a new majority in both chambers of parliament. Even if there are MPs there who do not belong to any parliamentary group, some opposition politicians are likely to be needed for an “alliance of those responsible”. Alternatively, there is already speculation about a non-partisan government of experts, which President Sergio Mattarella could convene.

If none of these scenarios work, the country would face new elections. The opposition is already scratching its feet. According to a survey on Monday, which the TV broadcaster “La7” commissioned, the right-wing populist Lega around former Interior Minister Matteo Salvini would be the strongest force in parliament with 23 percent. Even the right-wing national Fratelli d’Italia would get 17 percent more votes than the five-star rating. In addition, there would be around six percent of Silvio Berlusconi’s conservative Forza Italia. With a total of 46 percent, the way is not far to a right-wing majority.

That would not be good news for Europe and the world. Under Conte, the country has shown itself to be a reliable partner. The non-party lawyer appeared as a persistent negotiator vis-à-vis Brussels, especially in the dispute over the Corona development fund. Nevertheless, he was always pro-European, emphasizing several times that Europe owed the historic opportunity to be able to redesign the country with the many billions.

In the right-wing bloc, on the other hand, there are EU skeptics like Salvini, who has already proclaimed the “Italexit” based on the British model and railed against migrants, plus a party leader in Fratelli leader Giorgia Meloni who has never officially distanced herself from fascism. The ray of hope in this trio would then actually be an 84-year-old political warrior whose party demands more political competencies for Europe and works with the CDU in the EU Parliament: Silvio Berlusconi.

More: Matteo Renzi’s party withdraws from the government. Why the center-left coalition broke up.

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Refugee policy in Italy: Trial against Salvini begins

Allegation: deprivation of liberty. Because he did not let 131 refugees ashore for days, Italy’s ex-interior minister has to answer in court.

Pleased with the loud support of his followers: Matteo Salvini Photo: Reuters

ROM taz | The trial against Matteo Salvini began on the first day of the preliminary hearing on Saturday. The head of the right-wing populist Lega has to answer in Catania for deprivation of liberty in 131 cases. He faces up to 15 years in prison.

During his time as Minister of the Interior, Salvini prevented a ship belonging to the Italian coast guard with 131 refugees from entering a port for several days in July 2019. For almost a week, people were forced to stay on the deck of the ship in the mid-summer heat.

Salvini’s approach in the then coalition of the Five Star Movement and Lega was part of his policy of “closed ports”: During his term of office from June 2018 to August 2019, he rigorously refused to dock NGO rescue ships in Italy – twice even for the Italian coast guard. It was about stopping the “invasion” of refugees and the machinations of the smugglers, he explained at the time.

The ex-interior minister brought various preliminary investigations. Because the government at the time was defending his immunity, he has so far got away. Since September 2019, however, the five-star movement has no longer governed with the Lega, but with the moderately left Partito Democratico. In the case now negotiated, the parties jointly voted in favor of lifting Salvini’s immunity.

Salvini’s successor should also take the stand

On Saturday lunchtime, the judge in charge announced that the preliminary hearing would continue on two additional dates in November and December. The public prosecutor’s office had previously taken the position that Salvini had merely performed his official duties and, together with the defense, had demanded that the proceedings be terminated.

For the next two hearing days, interrogations of the then Deputy Prime Minister Giuseppe Conte, five-star boss Luigi Di Maio and the then ministers for transport and defense are planned.

Luciana Lamorgese, Salvini’s successor in the Ministry of the Interior, is also supposed to take the stand. The judge apparently wants to examine the extent to which the “policy of the closed ports” was continued from the first to the second Conte government without Salvini’s influence. In the past few months, the Italian government has repeatedly refused to assign a port to ships with rescued persons on board.

Solidarity from the far right

Salvini should have been pleased with the solidarity of his supporters and right-wing alliance partners. Sympathizers demonstrated in front of the court with slogans such as “Bring us all to trial!” And “Stop the invasion!”.

Giorgia Meloni, head of the right-wing extremist “Fratelli d’Italia” (“Brothers of Italy”), traveled to Catania especially, as did Antonio Tajani from the Berlusconi party Forza Italia. The procedure was “monstrous”, Meloni found, and Italy threatened the establishment of a “regime”.

Salvini himself is of the opinion that the judges, only the voters, could decide on his actions. Furthermore, according to his line of defense, he did not act in isolation, but in agreement with the Prime Minister and the other cabinet members.

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