Fear and trembling in Italy before the storm
Italy is in countdown mode to Sunday's referendum which could further undermine the Euro and the EU, seal the fate of 8 banks, and even see Silvio Berlusconi back on the scene. Italy is in a desperate state. Anything could happen now
As I write, Italy is holding its breath prior to the constitutional referendum. Some Italians are holding their breath for a Sì, some for a No, and a lot just wish it were over.
These last include the financial markets who have read the Financial Times’s opinion that eight banks could fail in the event of a No.
One of these banks, Monte dei Paschi di Siena (MPS), is the oldest in the world and Italy’s third largest lender. It is in the middle of a capital raising operation vital for its survival. A bank failing means it is wound up, which means thousands of Italian families could lose their savings.
At best, savers could be given shares in the bank. MPS shares, which once traded at over €1,000, are now worth less than €20.
Many people think the Prime Minister Matteo Renzi could resign if he loses the referendum, and he has not discouraged such speculation. He says the President could appoint a technical government in the event of a No.
The last leader of a technical government, consisting of university professors and similar ‘experts’, Mario Monti, says Renzi should carry on even if he loses.
And well he might. Monti, when in power, acted like a wartime gauleiter for Angela Merkel, following orders. Despite he and his successor, Enrico Letta (also unelected), having been given warnings about changes to the rules on bank bailouts, they did nothing. Now Italy is not allowed to bail out its banks.
Italians, like Brexiteers, have good reason to despise ‘experts’.
Right, left, centre, technocrat, boring or populist, Italy has tried pretty well every type of government this century. The last time someone who stood for election as party leader and won it was in 2008, with Silvio Berlusconi.
Since his departure in 2011, Italy is already on its third Prime Minister, and people are already talking about elections before the due date of spring 2018.
After his ousting by Europe and his conviction, Silvio kept a low profile. But he has retained his power base of centre right MPs. This year he helped Renzi stitch up a new electoral law, which according to the Italian press was supposed to perpetuate centre-right/centre-left government by giving bonus seats to the winners.
It may have done the opposite. The far-right Northern League, which wants to leave the euro and maybe the EU, establishing wealthy northern Italy as an independent state, has grown in the polls. So has Beppe Grillo’s anti-establishment Five Star movement, which, if Renzi is forced out, might find itself the largest party.
But Silvio, with animal cunning, has sensed weakness in a possible prey. Matteo Salvini, head of the Northern League, whilst having grown the party, does not appear to have sealed the deal with the Italian electorate. There is a glimmer of an opening here.
That this opening might be filled by an 80 year old ex-convict who has recently had open heart surgery, is truly staggering. If Renzi loses the referendum, and it seems he might, Silvio has hinted that he could perhaps, if pushed, be persuaded to enter the fray again.
What might happen is that Berlusconi, in the public interest, naturally, could prop up Renzi against the growing menace of Beppe Grillo, sustaining him in office through the next year when Silvio’s appointed successor would look like a responsible, credible leader. Silvio can never lead again, but he can be the kingmaker.
Alternatively, Italy might go for something completely different, with 5-Star. Whatever happens, even if there is no change, the leader must learn from Renzi’s period in power. Like Silvio himself, he just didn’t do enough. The emphasis must be on growth and jobs, not politics.
Italy is desperate.
Tim Hedges, The Commentator's Italy Correspondent, had a career in corporate finance before moving to Rome where he works as a freelancewriter, novelist, and farmer. You can read more of his articles about Italy here
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