Liberation Day blues in Italy

The Government of Gianni Letta could prove to be 'Seaside' in all but name. Then again perhaps he will surprise us

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Italy celebrates its Liberation Day on April 25th
Timwork
Tim Hedges
On 25 April 2013 12:59

On April 25th each year Italy celebrates the Festa della Liberazione. It refers to the fall of Mussolini’s Social Republic in 1945. Any Italians expecting to be liberated from the recession, from their unemployment worries, or from the political impasse are likely to be disappointed. But new political steps have been taken and it is for Italy-watchers to decide whether these are movements along the right path or the beginning of a short-climb on the roller coaster before it returns rapidly downhill.

President Napolitano, re-elected last Saturday, made an aggressive speech criticising the parties which elected him and urging them to come to some agreement. He has now given a mandate to form a government to Enrico Letta. This is not a technocratic government, such as the one Mario Monti, also appointed by Napolitano, led until the elections (and he has been caretaker Prime Minister since then).

Enrico Letta was the deputy leader of the centre-left Partito Democratico, which with its allies just won the elections in February. There has been no leadership primary since the leader Bersani resigned so he is a sort of ex-officio leader. It will be a political government but a grand coalition, with ministers drawn from left and right.

People who know Letta (not to be confused with his uncle Gianni Letta who is a senior member of Berlusconi’s party) say he is clever, self-effacing and a mediator. He will need a touch of steel to add to this character portrait and we have yet to see if he has it. He is very pro-Europe and seen as on the right of his party. At 46 he is young by Italian standards.

The mediation job will be immediately apparent. Letta faces attack from three sides. The centre-right is nervous of a centre-left leader and will want some of its top people in place, together with some of its favoured policies: abolition of the Imu property tax created by Monti will be high on the list.

At the same time there is a threat to the stability of Letta’s government from the centre-left. The party has fractured since the election and the rather botched presidential vote, and the left of the party will be suspicious not just of having the centrist Letta for Prime Minister but also of the very principle of dealing with Berlusconi. Already, Nicki Vendola’s SEL grouping has said it will not be a party to the new administration.

Lastly there is Beppe Grillo’s Five Star Movement which has refused to negotiate with the other parties, declaring that they have failed and should retire (‘Let’s send them all home’ was one of his slogans). He has described both the re-election of Napolitano and the formation of a government by the two sides as an ‘inciucio’ or stitch up ‘picking at the bones of the Second Republic’ (mixed metaphor is OK in Italian speechmaking).

What can Letta do? Resolving the problems Italy faces seems like too much to ask: these include a massive debt, rising after the austerity imposed by Mario Monti; youth unemployment around the 50 percent level in the South; poor growth (Italy will have negative growth this year and 2014); and lack of faith in the political class.

It costs 30 percent more to hire an Italian in Italy than it does to hire a German in Germany. The Italian exchange rate should decline by this amount but it can’t while it is in the euro.

But Letta has a template for government: Napolitano, when trying to resolve the impasse between the political parties before his re-election, appointed 10 ‘wise men’, political figures, to seek out areas of agreement between the parties. Times change, and it is not certain that under the new structure these agreements will remain valid, but it is something to work on.

First and most important there must be political and constitutional changes. The present electoral law, which gives a strong mandate to the winner in the lower house but not in the senate, is unworkable. At the same time there must be some system where the lower house can take precedence over the upper: Britain’s Parliament Act is a good example. The big parties are receiving massive taxpayer funding, which inhibits change. Lastly there are too many parliamentarians, and they are paid too much. Even the presidential office, the Quirinale palace, costs more to maintain than the White House.

In my opinion it will be enough to secure Letta’s legacy if he can do just this and no more. The chances of imposing more economic reforms are slim. Austerity has become a discredited policy, and there is increasing complaint among the people that this seems to be imposed by Berlin. It is equally unlikely that there will be agreement between the parties on supply-side reform, such as abolishing Article XVIII, which makes it almost impossible to fire someone.

So Letta might improve the chances of an election coughing up a result, but at first sight it would seem little more than that. The election will thus have to be soon, perhaps October. The parties will remain in a state of flux. Letta is not formally head of the Partito Democratico, and they can hardly have someone imposed on them by the President.

If there are to be primaries he will lose some of his position among the left. Grillo’s party is rumoured to be losing support as people tire of protest and want a stable government; they are worried about supporting someone who will not contribute to the negotiations. But he may have a second lease of life if he can discredit Letta. Berlusconi is happy. He succeeded in preventing the Left from imposing a President who would cause him difficulties. He feels he can work with Letta and if this government fails he is ahead in the polls, at 33 percent, which would give him a majority.

Previously, I discussed the idea of a Balneare or Seaside Government, to tide the country over until people come back from their holidays. The Government of Gianni Letta could prove to be Seaside in all but name. Then again perhaps he will surprise us.

Tim Hedges is a weekly columnist for the Commentator. He previously worked in corporate finance before moving to Rome where he works as a freelance writer and novelist

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