By Lambert Strether of Corrente.
“How did you go bankrupt?” “Two ways. Gradually, then suddenly.” –Ernest Hemingway
In this post I’ll do a quick wrap-up of the Italian referendum results as I see them. Despite heavy-breathing from journalists on both sides of the Atlantic, I don’t view the the Italian electorate’s rejection of Renzi’s constitutional reforms as part of a putative “populist wave,” nor do I see the result as leading to an Italexit (or Quitaly, or whatever). However, the result does couple political risk and financial risk uncomfortably tightly, in that Italy needs a government that can take decisions in regard to what’s generally referred to as its “troubled banking sector.” Italy’s been good at kicking the can down the road. So far.
First, I’ll briefly summarize what the Italian referendum was about, and the results. Then, I’ll look at the narrative (“ZOMG!! Populism”) and the local particularities that make that narrative unlikely. I’ll also present some pundits whose hair isn’t on fire. Next, I’ll look at whether the results make Italy’s exit from the EU more likely (no). Finally, I’ll look at the gradually worsening Italian banking crisis, and ask whether whether anything “sudden” might happen; interestingly, there are rather a lot of leaks right now, and they’re not consistent, so I take it that European elites are negotiating with each other and potential marks investors through the press. More, I can’t say.
Caveat: I’m trying my hardest not to project my American political narratives onto Italy (that is, I think, what the “populism” narrative does (and I’m not even sure it’s correct for this country)). If we have any readers who are knowledgeable about Italy, please speak up!
The Vote and the Outcome
The Economist describes Prime Minister Matteo Renzi’s referendum:
He thinks Italy’s biggest underlying problem is institutional paralysis, and has called a referendum for December 4th on constitutional changes that would take back powers from the regions and make the Senate subordinate to parliament’s lower house, the Chamber of Deputies. This, together with a new electoral law that seeks to guarantee the biggest party a majority, will give him the power to pass the reforms Italy desperately needs, or so he claims.
Yet this newspaper believes that No is how Italians should vote.
Mr Renzi’s constitutional amendment fails to deal with the main problem, which is Italy’s unwillingness to reform. And any secondary benefits are outweighed by drawbacks—above all the risk that, in seeking to halt the instability that has given Italy 65 governments since 1945, it creates an elected strongman. This in the country that produced Benito Mussolini and Silvio Berlusconi…
(I’ll come back to the underlined sentence later.) Italian voters rejected Renzi’s proposal resoundingly:
The margin of the rejection– close to 20 percentage points – was much wider than expected. On a high turnout of 65.47%, 59.11% of voters chose no; 40.89% went for yes. Overseas voters bucked the trend, voting overwhelmingly (64.7%) for yes.
(Yet again the polls were wrong. That doesn’t, as such, equate to a populist revolt, though it’s worth asking why (most of) the polls keep being wrong.) Renzi is expected to resign (having promised to do so); that’s baked in to asset prices.
One overseas voter provides one scenario for the Italian government in the short term following Renzi’s defeat. From the Yale Daily News:
The most likely scenario is a technocratic government charged with changing the electoral law. This would lead to elections in six to 12 months.
The less likely positive scenario is that the current legislature runs its full course. However, this entails finding a government with the strength and legitimacy to follow through with much needed structural reforms, hence the “less likely” status.
The less likely negative scenario is snap elections. Much of the opposition that ran the “No” campaign is asking for new elections, planning to capitalize on the recent win. This would require an unobvious application of the current electoral law. As polls stand, the center-left party would face a second turn with the anti-establishment Five Star Movement. And if the Five Star Movement wins, Italy would become the first large European nation led by a populist, euroskeptic government, which may call for a vote on the euro. Or in other words, Italy could break the eurozone [although not the EU].
Now, for the big question: Who decides? Technically, the President Sergio Mattarella, who will first ask the center-left to try and form a new government. So really, the matter rests in the hands of Renzi’s party. And their congress is convening on Wednesday.
Wednesday is tomorrow! Reuters seems to have plumped for the snap elections scenario:
Italy could have an election as early as February, a minister in Matteo Renzi’s outgoing government said on Tuesday after speaking with the prime minister.
The comments will heighten support for a quick vote as the only way to avoid protracted political limbo in the euro zone’s third largest economy following Sunday’s “No” vote on Renzi’s constitutional reforms.
The two largest opposition parties, the eurosceptic, anti-establishment 5-Star Movement and the right-wing Northern League, are both pushing hard for elections.
Renzi announced he would step down after his resounding referendum defeat. President Sergio Mattarella told him to stay on until parliament approves the 2017 budget.
Moving quickly, Renzi on Tuesday called a definitive confidence vote on the budget, to be held in the Senate on Wednesday, after which he is expected to return to Mattarella with his resignation.
So Wednesday is tomorrow both for the Democrat Party congress and the budget!
The Narrative
Marine Le Pen, in a splendid example of the Rice-Davies Rule, provides the clearest statement of “populist” triumphalism. She tweeted:
Les Italiens ont désavoué l'UE et Renzi. Il faut écouter cette soif de liberté des nations et de protection !MLP #referendumcostituzionale
— Marine Le Pen (@MLP_officiel) December 4, 2016
[LE PEN:] The Italians have disavowed the EU and Renzi. We must listen to this thirst for freedom of nations
At this point, we remember the underlined passage from the decidedly non-populist Economist, which also recommended a No vote. So perhaps the narrative is not quite as simple as LePen would have it.
Let’s look a bit more closely at the vote. From Bloomberg, we have a map of the constituencies:
Do the regions (in yellow) that voted yes have a common factor? Indeed they do. The Conversation:
Only three regions voted Yes: Tuscany, Emilia Romagna and South Tyrol – two of which are traditional strongholds of Renzi’s party.
So it looks like although Italy as a whole decided a “strong man” wasn’t such a good idea, the regions where that strong man had a political machine disagreed. This again cuts against the simplistic narratives.
But what really cuts against the populist narrative is the nature of the opposition, which Jacobin describes:
In order to explain the outcome of this referendum, which saw a massive turnout of 67 percent and No winning with almost 60 percent of the votes, one has to look at the convergence of multiple factors. Forces across the political spectrum opposed the reform for different reasons. On the Left, the measure was challenged by the CGIL, the country’s biggest union; by the left of the Democratic Party, including its former secretary; by the National Association of Italian Partisans (ANPI); by the whole radical left, including left unions, social coalitions, students’ organizations, and the various networks of occupied spaces; and by a number of prominent left-leaning constitutional law experts such as Gustavo Zagrebelsky. The arguments ranged from the defense of democratic representation and popular sovereignty against the principle of governability to the opposition to Renzi’s aggressively neoliberal political project, of which the constitutional reform is only a portion.
On the Right, the reform was opportunistically opposed by the xenophobic Northern League, by the right-wing nationalist party Fratelli d’Italia, by neo-fascist forces such as Casa Pound and Forza Nuova, and — reluctantly — by Berlusconi. The reason for the mainstream right’s opposition is rather clear: as Renzi highly personalized the vote on the constitutional reform and linked the destiny of his government to the outcome of the referendum, the currently disorganized and fragmented right saw it as an opportunity to get rid of the government and start a process that may allow them to regroup and be competitive again.
Finally, the Five Star Movement, a catch-all populist movement with highly contradictory positions, resisted the constitutional reform all the way through the parliamentary debate, protesting at every turn against the violation of the most basic parliamentary rules by the government. The reasons for their position combined both a defense of parliamentary democracy’s rules and the ambition to overtake the PD as Italy’s principal party.
Der Spiegel provides a vivid example:
One of those who campaigned against the referendum was Rossana Rossanda, 92, an icon of the Italian left. During the 1950s and 1960s, she was part of the leadership of the Communist Party. She was expelled from the party in the 1970s for failure to support key party positions and, together with others who had run afoul of the party, formed Italy’s most important left-wing newspaper, Il Manifesto. Like many on the Italian left, the leftist icon Rossana voted against the referendum and against Renzi.
Rossana said the “pack” she had joined forces with was abhorrent to her. It included groups like the right-wing nationalist, xenophobic Lega Nord; the anger-fueled euro-skeptic, anti-everything party led by former comedian Beppe Grillo; and the remnants of those who in the past supported former Italian Prime Minister Silvio Berlusconi. Ultimately, though, Renzi is “just as bad” as them, she says.
Indeed, many members of Matteo Renzi’s own Democratic Party voted against him for the same reason, including heavy-hitters like former Prime Minister Massimo D’Alema or Pier Luigi Bersani, who served as the party’s chairman for years.
This isn’t a populist uprising at all. It’s a loosely sintered together temporary coalition with a single short term goal — getting rid of Renzi — with no coherence other than that, and all the issues and the players are highly specific to the Italian context.
Finally, here are some commentators who have maintained a degree of equanimity. (Since I don’t know the Italian punditry at all, I could be quoting the Italian equivalents of David Brooks, or Thomas Friedman, or Eugene Robinson. Or Patrick Buchanan. Sorry!) From the Italian Insider:
Political commentator Massimo Franco summed up the turbulent event that was the constitutional referendum, saying, “What this shows is that democracy is still alive and that the Italian people are still deeply tied to the Constitution. The attempt to strengthen a non-elected government through a consultation on a referendum turned out to be a gamble.”
From the Financial Times:
A note of caution is struck by Roberto D’Alimonte, a commentator in Il Sole 24 Ore. He writes that, for Italian voters, “the desire to protest has outweighed the desire to change”. But the outcome needs to be seen in context. “This referendum cannot be compared to Brexit,” he says, referring to the decision by UK voters in a June referendum to leave the EU. “Leaving the EU is a different thing, politically, to not changing the constitution.”
From the New Statesman:
Alberto Alemanno is Jean Monnet Professor of EU Law and an Italian. He said the reforms would have been vital to modernise Italy but rejected any idea it would lead to an Italian Brexit.
“While anti-establishment and eurosceptic actors are likely to emerge emboldened from the vote, interpreting the outcome of the Italian referendum as the next stage of Europe’s populist, anti-establishment movement – as many mainstream journalists have done – is not only factually wrong, but also far-fetched.”
So calm down. Or rather, you can panic when you get to the banks, but first we have to talk about the EU.
The European Union
It’s just not clear that anti-EU — and anti-Eurozone — forces can win control of the government. Politico:
“It is nonsense to call for Italy-exit from the eurozone or the EU,” wrote Lorenzo Codogno, a former chief economist at the treasury department of the Italian ministry of economy, to his consultancy’s clients on Monday. “Today’s outcome strengthens the anti-establishment and anti-euro parties such as the Northern League and the 5Star Movement, but again it would not be justified to jump to the conclusion that they will win the next general elections and that they will command an exit.”
(I suppose the Northern League and Five Star could join forces, but it’s one thing to cooperate to force out a common enemy; it’s another to make policy together.) However, even if anti-EU — and anti-Eurozone — forces take office, they face significant obstables. The New Statesman:
The Italian constitution bans the overruling of international treaties by popular vote, so Five Star would need to amend the constitution. That would require a two thirds majority in both houses of parliament and then another referendum on euro membership. Even that could be blocked by one of the country’s supreme courts.
Finally, absent exit from the EU or the Eurozone, the Italian government can be expected to approach Europe in the same way that Renzi did, since structurally nothing will have changed. The Guardian:
[A]ny new Italian government is likely to behave in the same way as Renzi’s government did towards its European allies, seeking to bend fiscal rules in its favour and to press for a more expansive fiscal policy. It will also continue to demand solidarity from the EU with its efforts to deal with migrants and to rebuild the areas affected by recent earthquakes. Italy is unlikely to be the domino that leads to more instability in Europe.
So, steady as she goes… Except for all those bad banks!
The Banks
Breugel has a fine summing up of the horror that is Italian banking:
Italian banks are still bearing the burden of a significant load of non-performing loans (NPLs). We have discussed the issue of NPLs in the Italian banking sector several times before (see e.g. here and here), and there is not much new on this front. As of September 2016, the Bank of Italy was reporting that the total of bad debts in the system was €198.9bn, down from €200bn in August. Table 1 shows updated 2016Q3 gross NPL ratios for some of the biggest Italian banks, showing that the situation is diversified. While some initiatives (such as the guarantee scheme GACS) have been taken recently, these will likely take time to bear fruit.
€198.9bn in bad debt seems like real money, even today. The poster child for bad Italian banking is Monte dei Paschi (MPS), said to be oldest bank in the world, and certainly one of the most decrepit; they need €5-billion by the end of the month, it’s not exactly clear how they’ll raise it, and the referendum results have thrown a political spanner into the financial works. Politico summarizes the state of play:
[T]he fall of about 4 percent in shares of Monte dei Paschi di Siena, Italy’s most troubled bank in the middle of a tense €5-billion fundraising, reflected more confusion about future steps in MPS’s recapitalization process than fears over a new European financial crisis.
Here the market’s muted reaction is largely due to lack of information. The key issue is whether MPS can get its fundraising off the ground. JPMorgan and Mediobanca, the Italian lender’s main advisers, met with potential investors on Monday, but no major decision was taken, according to sources. The big question is whether JP Morgan and Mediobanca can persuade a large pension fund or sovereign wealth fund to act as an “anchor investor” for the recapitalization, buying a large chunk of new shares to be issued and acting as a catalyst for others to join in.
The Financial Times reported that the two advisers were trying to persuade Qatar’s Investment Authority to put €1 billion into MPS. However, people involved in the talks told POLITICO that investors, advisers and MPS management were waiting to see the shape of the new government before deciding whether to pull the fundraising. That decision could come later in the week or even at the weekend.
The problem for JPMorgan and Mediobanca is that if they don’t find an anchor investor, they would have to agree to provide the €5 billion themselves in the hope of getting the money back from other investors later — a risk neither bank would be willing to take.
If the current plan fails, MPS and the Italian government have two main options, neither of them very good.
The first would be to undertake a state-sponsored “precautionary recapitalization” of the troubled bank. Under EU rules, this would involve imposing some losses on MPS’s bondholders. The problem with this plan is that a large percentage of the bank’s bonds are held by small investors. Inflicting losses on “mom-and-pop” savers would be political dynamite for any government — even if a new administration were to promise to compensate them for some of their losses.
A state rescue of MPS would also cloud the prospects for other banks seeking investors’ funds. For one, UniCredit, Italy’s biggest and one of Europe’s largest lenders, wants to raise some €13 billion.
The second option is simply to let MPS fail, providing an early, unwelcome test of Europe’s “resolution authority” for dealing with collapsing banks and increasing the risk of a huge loss of confidence in the continent’s banking sector.
(I think “precautionary recapitalization” is so Eurocrat. It’s the best phrase ever!) The BBC describes another option:
If [the investors] do decide the plan is now too risky then the government may have no choice but to nationalise the bank.
That would trigger a so-called “bail in” which means people who lent the bank money would have to write it off.
Unfortunately, 65% of those creditors are ordinary retail investors so the damage would be widespread and politically toxic.
There is another option.
The Italian government could decide to simply break the rules and nationalise the bank without hitting small investors.
That might be politically expedient but would be bitterly opposed in Germany and would set back immeasurably the project of banking union (separating the financial risk of banks from their governments – a move that came in response to the eurozone crisis of 2012).
The money comes directly out of some small investors’ pockets or it comes out of every citizen’s taxes.
The latter would be seen across Europe as a massive defeat in the battle to make sure taxpayers are not the first port of call when a bank fails.
(Italy doesn’t control its own printing press, so that’s not an option). And if the referendum vote wasn’t a populist uprising, bailing in the small investors would be an excellent way to create one.
The Wall Street Journal describes the state of play quite differently, earlier today:
ROME—The management of troubled lender Banca Monte dei Paschi di Siena SpA is set to meet officials at the eurozone banking regulator in Frankfurt on Tuesday, as Italy’s government crisis threatens to derail the bank’s recapitalization plans.
A person familiar with the matter said Chief Executive Marco Morelli and Chief Financial Officer Francesco Mele will meet officials at the Single Supervisory Mechanism, the eurozone’s banks supervisor, to discuss the implementation of the Tuscan bank’s €5 billion ($5.38 billion) capital increase.
The person said the investment banks working on MPS’ plan and the Tuscan bank will decide on the recapitalization by Friday.
The bank aimed at raising €5 billion by year-end, as agreed with the eurozone supervisor, by asking bondholders to convert risky debt into equity and selling fresh shares to cornerstone investors and on the market.
So far, bondholders owning slightly more than €1 billion worth of junior bonds have agreed to convert the bonds into equity.
The bank is still in talks with large investors, including some Qatar-based funds, to sell them a large chunk of the new shares, people familiar with the talks said. But these investors are waiting to see how the government crisis evolves before making any investment decision in Monte dei Paschi, the people added.
And Reuters describes the state of play in yet another way, but agreeing with the Politico on “precautionay recapitalization,” a bit later today:
Italy is preparing a state bailout for Monte dei Paschi di Siena (BMPS.MI) as the bank’s hopes of being saved by private funding fade following Prime Minister Matteo Renzi’s decision to quit, sources close to the matter said on Tuesday.
One of the sources said a government decree authorizing the deal could be rushed through as early as this weekend.Italy is likely to pump government money into Monte dei Paschi under a so-called precautionary recapitalization, three sources familiar with the situation said, to prevent the bank failing and triggering a wider banking crisis.
Such a crisis could destabilize the whole bank sector, burdened by 360 billion euros of bad loans, and inflict heavy losses on tens of thousands of ordinary Italians who hold junior bonds in the Tuscan bank.
However, sources close to the matter said on Monday that investment banks lined up to underwrite that plan, led by JPMorgan and Mediobanca, had in effect put the deal on hold because of the political uncertainty.
Under a pre-underwriting deal, they can drop the transaction because of adverse market conditions. One source said they would make a decision by Friday but that the chances of the deal going ahead were now slim.
Monte dei Paschi had pinned its hopes on Qatar’s cash-rich sovereign wealth fund injecting up to 1 billion euros in the lender. But bankers close to the underwriting consortium said the fund and other potential investors wanted to wait to see what kind of government would succeed Renzi.
Rome wants to avoid losses being imposed on retail investors who hold 2.1 billion euros of the bank’s junior debt.
And the Financial Times describes the state of play in still another way:
Without the cornerstone investment from Qatar, the other parts of the complex plan to fill the bank’s €5bn capital shortfall are likely to collapse.
“Complex” is a word I never like to hear. Complexity is the enemy of quality. More:
To avoid the politically unpalatable option of imposing losses on the €2bn of retail bondholders in Monte dei Paschi, a plan is being drawn up to guarantee full repayment of the first €100,000 to every junior bondholder, according to senior bankers.
Senior bonds and deposits would be left unscathed. The bank is also likely to press ahead with plans to hive off €28bn in soured loans to a securitisation vehicle supported by a government guarantee.
“Whatever solution is found for Monte dei Paschi, I believe there is a significant risk of contagion to other Italian banks in particular,” said Megan Greene, chief economist at Manulife Asset Management.
Meanwhile, the ratings agency Fitch doesn’t like the political risks:
The “No” vote at the constitutional referendum has further heightened political uncertainty and possibly reduced the capacity to implement economic reforms. The risks from political instability were one factor that contributed to our revision of the Outlook on Italy’s ‘BBB+’ sovereign rating to Negative in October.
The banking situation clearly demands the full Yves treatment, which I’m not capable of giving it. From what I can glean, Renzi is being kept around so he can sign whatever papers the technocrats come up with, hopefully by the end of the week. And surely five billion euros is a rather trivial sum? If the investors — private or public — can be offered suitable inducements, surely a collapse and contagion can be avoided? Even at the cost of a populist uprising by bailed in small investors, should it come to that? And how can Qatar back out of a deal that was so palpably bad to begin with?
Conclusion
The whole situation reminds me of the famous saying by Karl Kraus: “In Berlin, things are serious but not hopeless. In Vienna, they are hopeless but not serious.” Still true in Berlin today, and substitute Rome for Vienna. Things are different for the voters, of course. They always are…
Appendix: The Curious Case of Five Star
Many sources agree that had the referendum passed, Beppe Grillo’s Five Star Movement would have benefitted. Jacobin:
If Yes had won, we would have risked ending up with a Five Star Movement or right-wing government with much greater executive powers than the ones currently allowed by the constitution. Not to speak of the majority system bonus’s effects. And even in the case Renzi had managed to secure a majority for the center-left at the next elections, we would have ended up with more neoliberalism and with an even stronger government with no space for effective opposition.
The risk of Mr Renzi’s scheme is that the main beneficiary will be Beppe Grillo, a former comedian and leader of the Five Star Movement (M5S), a discombobulated coalition that calls for a referendum on leaving the euro. It is running just a few points behind Mr Renzi’s Democrats in the polls and recently won control of Rome and Turin. The spectre of Mr Grillo as prime minister, elected by a minority and cemented into office by Mr Renzi’s reforms, is one many Italians—and much of Europe—will find troubling.
Ironically Renzi’s reforms to the constitution and senate would have made it easier for the eurosceptic Five Star Movement to gain power in upcoming elections in 2018.
And now the puzzling part. Still the New Statesman:
For reasons best known to themselves, they campaigned against the changes to their own disadvantage.
Can somebody who actually understands Italian politics — assuming, for the sake of the argument, that this is possible — explain why the Five Star Movement campaigned as it did?
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Perhaps Five Star figured it could get the same “reform” later once it’s in power, gambling that helping to destroy Renzi would be a better way to increase Five Star’s popularity. And a “yes” might have given Renzi a better shot at minimizing Five Star through political means before the 2018 vote. Just a guess.
The whole Italian constitutional “reform” notion reminds me of the U.S. security/military/intel strategy after 9/11: We screwed up, so give us more power! Which worked just fine for them here.
Beppe Grillo and 5 Star are not in it for themselves.
F they had backed the changes, charges of doing whats best for them ahead of whats best for the country could have been levelled against them.
They are a popular uprising against the corrupt, greedy, self serving elites and do not want to copy their methods or just get into power because they think they deserve it or are better than the little people and should tell them whats best for them.
Thanks for this.A huge labor of love. I lived in Italy from 1972-1976, also a very troubled era. Somehow Italians manage to muddle through it all. They don’t call Roma “La Citta’ Eterna” for nothing!
ditto – great summary Lambert!
Thank you for writing this, although I would have liked to see it before the referendum, not after. It is a pity you allowed the whole “populist” narrative go unchecked until now, not to mention the whole “Italy will vote to leave the Euro”-nonsense.
Also thank you for not misspelling a single Italian name in the whole article, an achievement in itself.
Although of course, it is der Spiegel, not Speigel.
If I had a nickel for every “Der Speigel….”
We are a US site, with very limited resources and focus on finance and economics. Heretofore, we have only written about the slow-moving bank crisis in Italy and how the new bank resolution framework is guaranteed not to work.
We’d like to be able to write more on national politics of other countries, but as Lambert noted with his worries about whether his sources are the domestic equivalent of David Brock or Thomas Friedman, it’s very risky to do so if you don’t know the pundits and analysts. We are thus very careful about sticking our necks out beyond our core expertise.
“Can somebody who actually understands Italian politics — assuming, for the sake of the argument, that this is possible — explain why the Five Star Movement campaigned as it did?”
I could perfectly be wrong ,but the explanation maybe is more simple than expected and not particularly linked with the particularities of Italian politics : would you take an easier but minor victory now on your enemy or wait for an evidently far more uncertain but possibly major victory after two years ? In Italy one of our proverbs says : meglio un uovo oggi che una gallina domani ( better an egg today than a chicken tomorrow ).
Of course, that way you run out of chickens pretty quickly.
How can you run out of something you still don’t have ?
this could be the question of the century
How could you have an egg without a chicken?
Then, in any political game, how could a self-proclaimed anti-establishment movement have supported a reform set and sponsored by the principal establishment representative of the moment ?
I think that’s right. For many I’ve spoken with the referendum came down to support for or against Renzi. This was made easier by Renzi vowing to step down should he the referendum fail, which seems to account for the awkwardness of the No coalition. (And I suppose for some of the Brexit comparisons, in so far as unseating PMs).
Again based on personal anecdotes and conversations, many in the No are in favor of structural changes. However the Si/Renzi supporters could not articulate clear reasons why the reform should be supported beyond the broad strokes; the details are incredibly convoluted, enough for the average voter to vote No if they have any doubts about Renzi and the center-left. Meanwhile the No coalition was very detailed and specific in their arguments.
Aside from the banking crisis (a big aside, clearly) there is room to channel the discontent away from the Lega or M5S and PD for that matter. The question is where but the desire is widespread.
It’s funny how “precautionary recapitalization” is politically A-OK in the Eurozone but fiscal transfers to address trade imbalances are subsidies to lazy shiftless layabouts and politically untouchable. So the banks all get a free pass, the little people suffer and everyone is totally cool with this (except for the little people, of course). Hell is other people, indeed.
” it’s worth asking why (most of) the polls keep being wrong.)”
That’s easy: caller ID. People don’t answer their phones unless they recognize the number (I was a late adopter.) Those who do are not typical, nor a random sample.
It seems to me that Italians voted FOR gridlock and governmental paralysis. Sound familiar, at all?
I haven’t lived in Italy for many years, but during the years I was there I figured out that there was a good reason Italy has had so many (at this point 65!) governments since 1945. Paralysis, collapse, short-term technocratic “solutions to the crisis,” formation of a brand new government. Rinse, repeat.
Stability and consensus are deeply mistrusted– as they could lead to a rigid system that couldn’t be easily adapted to local needs. This adaptation is achieved through time-honored means: of “cutting through red tape,” with local patronage networks, and flexibility in enforcement of laws and regulations.
After the collapse of the western Roman empire, Italians became masters of playing off centralizing authorities– like the Church and the Holy Roman Empire– against each other, to preserve local autonomy. The imperfect 19th century unification, followed by the fascism of the 20th century, made localism and mistrust of central power structures the default, defensive attitude of many Italians.
You see this natural localism today everywhere in Italy, not just in the intensely anti-establishment people who now support 5 stelle.
Il Fatto Quotidiano was vociferously against the referendum, and several of the leading writers are almost stereotypical Piedmontese (brainy, a bit severe, wily–but in a polite way), which may explain the results in Turin and Piedmont.
Vecchi:
http://www.ilfattoquotidiano.it/2016/12/06/renzi-ha-esagerato-con-le-bugie-la-sfida-con-m5s-ora-e-sulla-credibilita/3242473/
He says that Renzi has to stop his lying. (Sound familiar?) Renzi has to admit to understanding the economic unease. (Sound familiar?). Vecchi also points out that the Five Star-ists have to show that they aren’t just an Internet-spawned revolt and that they have to have the common good at their center. (Yes, he uses the Italian words for common good. Figuratevi.) What Vecchi means is that Grillo is part of the problem, which may explained why the M5S went from opposing the referendum through parliamentary maneuvers to sending mixed signals. M5S wastes a lot of time in public in-fighting–a level that even Italians, used to public disputes, find distasteful. So Grillo, who is somewhat charismatic and somewhat the loose cannon, is their dilemma.
Renzi, though, has managed to erode the traditional discipline of the Italian Left. Note comments above in the Lambert’s story from Rossana Rossanda, one of the greats.
A lot of interesting stuff in Vecchi’s article, some of it not unfamiliar. A couple more passages, translated:
“For out of those who don’t consider [M5S] a [reasonable] alternative, many consider Renzi to be just as problematic, and therefore they didn’t allow him to rip up the text of the Constitution. This is the new silent majority. The people that don’t have, don’t see, don’t find, don’t recognize themselves in any political grouping. And don’t trust anyone. And even if they do think one of them is less bad than the other, they still aren’t willing to let him devastate the nation.”
“[Also] complicit [in this] is power as a whole, which backed [Renzi] up, clearly supporting him even when it should have been safeguarding the State – for example, the president of the Republic, [who remained] silent. [Also] complicit was almost the entire press, that did nothing besides relay the master’s voice, going so far as to invent news in order to discredit the enemy of the leader (the article in La Stampa on M5S cyber propaganda was perhaps the nadir).”
Because Beppe Grillo panders with the best of them and he is just as clueless. I loved your synopsis, Lambert. It was spectacular. Sent me spinning. Thinking about Renzi, hat in hand, coming to Obama and getting shut out just like the Greek envoys – because CDSs I assume. We have Greenspan to thank for so very much. Also remembering Schaeuble’s 2012 “we are overbanked” comment and his ongoing reluctance to do anything that perpetuates more bank largesse. Even tho’ he’s fudging as much as a curmudgeon can fudge. And your blurb about the EU’s “precautionary recapitalization” made me chuckle… because it is so politically correct especially when the EU has no mandate – no fiscal, no political, no nuthin – that it can use to pry itself out of this muck. So it’s like the EU’s “Banking Union” is analogous to Glass-Steagall – a firewall protecting tax payers. OK as far as it goes. But for Renzi, Italy and the EU I think there is a message here about the logical progression of things: if political reforms preclude economic reforms chances are the economic reforms should precede the political reforms and not go the neoliberal have-cake-and-eat-too way. They could always extend the misery out 100 years with not just precautionary recapitalizations, but also with precautionary derivatives of recapitalizations. Why not? And derivatives of derivatives hedging risk and reward in multiple layers until money finally finds its true calling as a utility in and of itself. Maybe Greenspan was on to something.
The most evil solution possible is to “bail-in” savings and checking accounts so they can “save” bank bond investors from the trauma and inconvenience of a bail-in.
Will be interesting to see how that goes. For us. Not so much for those poorer Italians whose life literally depends on their choice of a low risk, ZIRP, “liquidity preference”.
When a governing leader in a relatively democratic country calls a referendum, the nominal question is in fact irrelevant. Does anyone here have the slightest memory of the nominal question in the referendum that forced de Gaulle to resign? The issue in all such referenda is the politician who called for it. And when that politician is the establishment’s leader the NO vote is the Populist vote. In the last few months we have seen dramatic popular repudiation of four of the five leading figures of the Western Establishment–Clinton, Cameron, Hollande, and now Renzi (with Merkel barely hanging on). If that ain’t POPULISM in action, what would be?
a few thoughts:
in 2015 the government passed the ‘italicum,’ an election ‘reform’ guaranteeing an additional number of parlimentary seats to the winner of an election for prime minister. the referendum just defeated was meant as a continuation of that ‘reform.’ now, it is assumed that the ‘italicum’ will be modified at the least or rescinded.
(roberto d’alimonte, whom lambert quotes, is one of the forces behind the reforms–or so i recall.)
yes, cinque stelle would have benefited from the reforms had they won an election. but 2018 is far away. the first job was to get rid of renzi.
as renzi just said, ‘i didn’t know i was hated so much.’ probably cinque stelle was as surprised as he was.
even if there is a snap election (there won’t be), cinque stelle would not win.
several of the sources lambert quotes say that grillo would become prime minister if cinque stelle won. but grillo is ineligible for office because of his conviction in a manslaughter case (driving a car in which people were killed). that party’s current candidate for p.m., luigi di maio, barely 30, is so lightweight he looks lucky not to be blown off the stage when grillo goes into his rants. he can’t hold his own on those tv talk fests.
i saw an exit poll the other night on rai asking voters what party they would vote for in a national election: the p.d. (renzi’s party, without renzi presumably) won easily over cinque stelle (can’t remember the exact percentages). the lega nord is sinking fast fast, and is no longer a threat. not sure why they keep getting press.
in national politics italy is still without a real left.
yes, cinque stelle would have benefited from the reforms had they won an election. but 2018 is far away. the first job was to get rid of renzi.
as renzi just said, ‘i didn’t know i was hated so much.’
LOL!! He’s just a smug dolt. I saw the 60 Minutes interview with Renzi a week and a half ago. He oozed slime even in that interview. He comes off even sleazier than John Edwards(Remember him?).
“Senior bonds and deposits would be left unscathed. The bank is also likely to press ahead with plans to hive off €28bn in soured loans to a securitisation vehicle supported by a government guarantee.”
#Cringe … Well I would certainly hope so regarding plans for a government guarantee. Italy is not monetarily sovereign.
The New Statesman:
Ironically Renzi’s reforms to the constitution and senate would have made it easier for the eurosceptic Five Star Movement to gain power in upcoming elections in 2018.
And now the puzzling part. Still the New Statesman:
For reasons best known to themselves, they campaigned against the changes to their own disadvantage.
Can somebody who actually understands Italian politics — assuming, for the sake of the argument, that this is possible — explain why the Five Star Movement campaigned as it did?
Because it was a trap.
The new architecture would have grant any election winning party a solid majority in the italian lower chamber only. Conversely, the upper chamber would morph in a reservoir for the Italy regions’ ruling parties, because instead of filling the place by ballots, the regions’ governments would handpick the senators (more or less).
Right now the Democratic Party is ruling over 16 regions out of 20 (http://www.repubblica.it/static/speciale/2015/elezioni/regionali/).
Given a snap elections scenario and assuming 5 Stars would win, it would translate in a 5 Stars controlled lower chamber and DP controlled upper chamber. Lame duck-cracy anyone?
For a good break-down of the referendum outcome (italian only, sorry):
http://www.ilfattoquotidiano.it/2016/12/05/referendum-analisi-dei-flussi-pd-ed-ex-pdl-si-sfaldano-m5s-compatto-per-il-no-periferie-e-giovani-puniscono-renzi/3239148/
But still, you have to admit it is a long way from Togliatti and the left cultural hegemony of the Italian Communist Party to the Five Stars Movement and Beppe Grillio.
Isn’t it about time to drive a stake through the “telltale heart” of the EU and the euro and chuck the cadavers into the dumpster of history? The EU, in effect, has morphed over the years into the European branch of the diabolical international neoliberal criminal enterprise of rapacious banksters, corporate cannibals, aiding and abetting bureaucrats and crooked politicians that represent the true nature and essence of Gobbleization. Gluttonous greed! The euro is a hangman’s noose around the necks of the hostage countries. If you doubt that ask the “zombie country” formerly known as Greece. And while we’re on the subject, NATO should be Nexited too!
Couldn’t post earlier better late than never:
If it’s easy access odds are you are reading fools, but that is likely true world-wide. You can ignore the Italian MSM, it’s like the USA one, calculated echo chamber but worse as soccer doesn’t fill in as many hours of the day the way baseball, football, basketball and hockey together, so the political soap opera fills in the rest. If something reasonable comes through it’s only because it’s better than dead air. Even the few honest pundits suffer the Latin trait of going on way too damn long until it degrades into gesticulation and talking over each other, short and to the point isn’t Italy. I’ve yet to figure out whether the media-political melodrama is actually the soul of a sunny caffeinated culture or some version of ordered droning baroque hypnotism, didactic spectacle like all the religious paintings in all the churches.
I agree and see my last comment. I don’t know about the other two regions but want to add if you look at the provinces in Tuscany the poor ones broke 60-40 against like the rest of the country, the rich populous ones went for yes. MPS is a powerhouse institution in those provinces with largess spread on many levels, the old left and now the PD were always a revolving door with MPS, something that must have been on many people’s minds but not in the way of punishment. I think they trusted their man Renzi (ex mayor of Florence) to best put Humpty Dumpty back together again.
Looked like a hedge to me. D’Alema is like a mafia Don. All polls for a year showed Renzi falling hard. If the party was aligned they’d loose the whole edifice along w/ Renzi. The false infighting was necessary so that some part of the PD would be left standing.
Correct. Exceptionally farfetched is anyone expecting a euro exit. Italy is heavily populated with old people and people heavily invested in the system. Seems half the people here work(ed) for the state which means they spent or will spend 35 years staring at the clock as the minutes of their lives tick away waiting for their deferred comfy pension dream. A good part of those pensions maintain all those 18-35 (or 55!) y/o’s who are 40% unemployed. This also isn’t England where you can sell the fiction of glorious past empire and envied sterling. At it’s swan song 1000 lira got you a can of soda pop, no nostalgia for that. Italy will vote to leave the euro not when it’s too angry but when its people feel their future will be safer without the euro than with it. That is a very long way from now. I’ve no idea why M5S even brings it up, it would be their Cameron-Renzi moment but in this case it would be the party’s annihilation. M5S has shown surprising savvy for a party learning the ropes, if they get in power forget any references to leaving the euro unless they decide to really fight the austerity war with the EU that Syriza balked on. I think they are too smart for a frontal assault with an unloaded weapon.
UGH. This is such oddly uninformed crap that I must assume it’s intentional alarmist misinformation, or more lazy anglo snobbery. MS5 has been building slow and steady with surprising savvy and focus for close to a decade now. For a bunch of political amateurs it’s astounding, and considering the incessant, monolithic MSM barrage of vitriol and carpet bombing lies sent against them, not to mention whatever Masonic witchery is cooked up, it’s a notable accomplishment.
As for Grillo, his trade – Comedian, usefully a short jump to Clown, is unfairly turned against him, satirist would be the unloaded term. He’s not Carrot Top, for anglo’s he’s from the line of cultural comics like Lenny Bruce, Richard Pryor, George Carlin or to today’s crowd, Jon Stewart. Grillo does not head the Party, he heads a movement he founded about 10 years ago in ‘mad as hell’ desperation he named M5S that shares a rather well thought out No Global-OWS-MMT philosophy and platform, you can google the latter, should be in english too. Their website beppegrillo.it (vain sounding but his blog was established before the movement) will often have salient posts translated in English. The Party itself is run openly and transparent as possible with public votes on the internet (yes, that is proving difficult).
Unlike OWS instead of sniffing their own farts Grillo and M5S were sharp enough to go after political power and ran unaffiliated regional candidates and rather quickly found themselves with an actually party, again slow and steady. If combobulated to you is a Saville Row suit, bowler and umbrella, then M5S could be seen as discombobulated. Otherwise giving that an eminent democracy like France has only served up LePen as an alternative to neoliberalsim, and Spain and Greece put together a lame bunch of tired socialist and communist opportunists, retrogrades, and sad sacks, that Italy managed to build the planet’s only OWS-No Global party on the verge of national power is IMO pretty damn impressive. People world-wide should be supportive and grateful.
Grillo as prime minister boogie man: The Economist needs better researchers, and I suggest a pentium 285, 9600baud modem and this clever ‘search engine’ called ‘google’. One of Grillo’s mad as hell pet peeves, his prime motivator actually, is crime and immunity in Italian politics. The M5S platform calls for prohibiting anyone convicted of any crime at anytime in their lives to be barred from political office. Grillo, if I got it right and please correct me if wrong, was in the past convicted for involuntary manslaughter in a traffic accident. To stand by his own convictions he ruled himself out of running for office. Though this was quickly turned around to be some clever dark puppet master. Since he’s the lightning rod for so much negative media attention because of his Howard Beale personality, he stepped away from the limelight last year after the party’s successes letting it fledge but came back in once Renzi wound him up with this referendum; Grillo is easily wound up. Whether he develops a Napoleon complex if M5S gains power, that is unpredictable, and for myself I will turn on him once that happens, for now he is a-okey by me, show me better.
As for why Grillo and M5S would support No against their own apparent self interest, as some said it’s a Trick. But also, as unusual and incredible as this may seem nowadays, it’s because M5S felt messing with the constitution was unacceptable, irrelevant and unnecessary. They actually reneged on a short reward advantageous power play to do what the felt was best for Italy. Hard to believe in these cynical times, and how unexpected to Italian Machiavellian stereotype.
They actually came out and said what I stated above, clearly, from the start, no trickery, no subterfuge, no discombobulation.
Which leads to this:
Sorry Lambert I don’t see it this way. What part of ‘Constitutional’ referendum are so many people not getting here? In the USA the Constitution is ensconced, enshrined, exalted but in Italy it’s a Post-It note on the fridge? People in every country respect their Constitution, at least where it respects them. People love their Constitutions, hate their politicians. Every country’s Constitution is a beautiful, uplifting read – check it out – and a beautiful reality when and where applied (not often, sadly). The vast majority understand it’s what stands between them and injustice if not wanton abuse. Mess with the Constitution you mess with your foundation and stability and safety. No one was complaining about the Constitution during the Italian Economic Miracle from 1945-1975 and most Italians are smart enough to understand the problems now don’t stem from the Constitution, they are political and they require political solutions. Renzi’s simple majority referendum over something as important as the Constitution insulted and pissed people off, especially and surprisingly young people, they thew it back in Renzi’s face and and the rest of the politicians’ faces. The message was deal with it politically, keep your hands off the Constitution. IMO any other pol and other moment would have had the same result, but really, we are talking Renzi, folks, we are not talking Founding Fathers here. imagine HRC, Trump, Holland, Sarkozy, Cameron, Major, Brown, May, Rajoy, Merkel… telling you you need a new Constitution, now put a twit like Renzi at the very bottom of that pathetic totem pole (totem pol?). Tough sell made impossible by a bungling salesman.
The governing elites everywhere keep proving themselves incompetent (luckily) and keep loosing legitimacy with every step, it’s becoming a death spiral. I believe Italy hasn’t had proper elections since Berlusconi’s last government, eight years now? Everyone is aware of it. Another ridiculous technocratic government or grand coalition of two failed, disliked centre parties would only buy time for what exactly, to reinforce their illegitimacy? Snap elections would be the smart choice regardless who will win. But hard to figure out how corrupt, compromised and decrepit systems with a mega bank crisis reason.
M5S might be a coalition Movement but is not an umbrella Party. They forbid people with past political history from running for office with them and they refuse to make alliances with members of what they see as a failed system. At first this seems stupid not to steal members, especially skilled parliamentarians, from the failing left or centre right but if you look at the disappointing failures of Podemos and Syriza you can only wonder how they were so prescient. These retrograde elements would only be a millstone and full of subversives. If they win however as Italy’s largest single party they will have a majority of seats but not any sort of governing majority. Any laws they pass will have to be on an ad-hoc basis. This is why a yes vote on the referendum would have been so empowering to them. You can bet every other faction with not help them even if they agree and just block and stall trying to make M5S look too self-involved and incompetent to govern. Wear them out in the public mind. I don’t see a way out but hey, one step at time, it’s a brave new world. If only the Occupy-PD faction (the honest part of the old left) that formed around the Rodota’ event had left their careerist and tribal loyalties behind and formed a new left part, they and SEL (like the Greens) in a moment of rare altruistic enlightenment could have supported but not aligned with M5S with which they share just about every single platform element and give Italy an unopposed modern left government that could truly confront and change the EU. We must wait and see, could happen ad hoc, or grow out of a future PD/PDL crash, but that IMO would be the very best scenario. Everything else is as big a mystery as Trump. Don’t touch that dial!
People in every country respect their Constitution, at least where it respects them. People love their Constitutions, hate their politicians.
and
…most Italians are smart enough to understand the problems now don’t stem from the Constitution, they are political and they require political solutions.
Substitute “Italians” for “people” and the rest of what you said, for me, was spot on. Thanks!
Great comment. Thanks. Going to use it (if I may) in a future blog post.
I really feel like all the recent elections have a common thread. Simply put, people are being asked to participate in a political process, which is relevant to a paradigm that arguably, no longer exists, i.e., the sovereign nation state.
I’ve yet to figure out ,what point are elections when a state no longer controls its currency, other than to give the people the illusion, that domestic policy can do anything but serve the unaccountable technocrats.
Renzi simply was asking people to formally grant him autocratic powers, willingly , through the ballot box in service to the demands of the EU.
This outcome, hasn’t done anything to resolve the underlying issue of how we define the current alignment of the industrialized world.
I’m ambivalent about globalism, as the 20th century was hardly a ringing endorsement for the efficacy of the sovereign nation state as an organizing principle.
On the other hand, if the free flow of capital, finance and trade are to be the ordering structure, its proponents can’t continue to pretend that nationalism and open hostility, isn’t the natural response, that threatens the stability on which it is based.
I’ve heard it called neo feudalism but to me it is closer to the days of the Hapsburg’s or the Medici. More palace intrigue than transparency or coherency . Who are these people, that purchase the domestic policy, playing one country against another to their benefit and owe allegiance to no one? How much longer will people continue to pay the ransom the oligarchs demand?
Earlier this year Mario Draghi commented on how the European banking sector needed thinning out.
The ECB came up with a cunning plan (of the Baldrick variety – UK comedy Blackadder).
They are going to save the bad banks and close down the good ones.
Italians are fed up with euro and European Union which is just an artificial entity where Germany, the European financial elite ( German and French Big Banks, above all ) and the European technocratic elite rule all over the other European countries!!
Apart from that, this reform of Italian Constitution wanted to state very clearly the absolute supremacy of the European law above the Italian original Constitution and because of the fact that Italians have realized that European Union is only an unkind stepmother and euro is the worst stepfather that they could ever have, even in their darkest nightmares, then, as a logical consequence, they have voted for a resounding: NO!!!!
Best regards, greetings from Italy.
Fabrice