By Conor Gallagher
Italians elected their next government on Sunday, and as expected the Brothers of Italy Party (Fratelli d’Italia or FdI) and its leader Giorgia Meloni came out on top with a projected 26 percent of the vote.
The bigger winner, however, was disillusionment. It was the lowest voter turnout in Italy since World War Two.
🇮🇹🗳️ Ce niveau de participation serait évidemment un record historique. 2/2 pic.twitter.com/jQeOrXlgvE
— mathieu gallard (@mathieugallard) September 25, 2022
The cruel reality is dawning on Italians that no government will be able to reverse the decades-long decline in Italian living standards. Rome has little choice but to go along with Brussels dictates; if they don’t the European Central Bank is likely to threaten excessive deficit procedures or engineer a debt crisis as it has in the past.
If it wasn’t clear enough, EU Commission President Ursula von der Leyen issued a thinly veiled threat two days before Italians went to the polls.
NEW – EU Commission President on the upcoming elections in Italy, where a right-wing victory is expected:
“We will see. If things go in a ‘difficult direction’ – I have spoken about Hungary and Poland – we have tools.” pic.twitter.com/PxtvpXyCua
— Disclose.tv (@disclosetv) September 23, 2022
The EU also has a new tool in its back pocket: it could yank the more than $200 billion going to Italy as part of the zone’s Covid recovery package, Next Generation EU.
Meloni and the Fdl campaigned primarily on anti-immigration efforts coupled with tax cuts and piecemeal financial assistance to a beaten down electorate. But the biggest point in their favor was that it is the only party that has opposed the pro-EU and technocratic governments of the past ten years. That includes the most recent led by the former vice chairman and managing director of Goldman Sachs International and president of the European Central Bank Mario Draghi.
Support for the other rightwing parties that have tried and failed to stand up to Brussels in the past dropped considerably after they supported Draghi.
Italian politics are described as in a constant state of paralysis with good reason. There is little movement in areas of broad support as such policies are blocked by EU rules on deficits. And neoliberal programs don’t garner support; they are therefore pushed through during times of crisis under non-elected governments like Draghi’s.
As the new government prepares to take power, now is a good time to look back at Draghi’s time in office, what “reforms” he pushed through, and how he likely tied the hands of future governments by granting the EU even more control over the economic policies of Italy.
Widely dubbed “Super Mario” when the Italian president, Sergio Mattarella, handed him the reins of government in February, 2021 during the COVID crisis. Mattarella asked Draghi to form a government of national unity, saying it would be too much of a risk to hold elections at that point in the pandemic. Draghi’s economic reforms were supposed to reassure bond markets and propel the Italian economy forward.
Instead, interest rates on Italian bonds are at a 10-year high, Italian real wages are falling at the fastest pace in the EU, and it remains the only country in the bloc where wages have fallen since 1990.
Temporary, low-paid contracts now account for the majority of new jobs and 5.6 million Italians — including 1.4 million minors — currently live in poverty, an all-time high.
Inflation is driving down households’ real purchasing power, business and consumer sentiment is plummeting, and funding costs are rising leading to estimates that Italy’s economy will grow at only 0.5 percent in 2023 – the lowest in the EU.
Draghi did manage to push through structural reforms aimed at privatization, deregulation, weakening worker rights, and fiscal consolidation. He also further strengthened the EU’s stranglehold over the Italian economy.
The measures were pushed through under the pretense that Italy desperately needed the $200 billion in European Covid recovery funds to kickstart its economy.
In order to access those funds, which are nowhere close to what’s necessary to meaningfully impact the country’s battered economy, Italy was required to implement the reforms demanded by Brussels. (Indeed, some argue the entire point of the recovery funds is to offer states a pittance in exchange for giving up even more power to the EU.)
Draghi was happy to oblige. He first hired McKinsey to consult on Italy’s spending of its EU Covid funds.
So predictable, so sad: Mario Draghi hired McKinsey to ‘organise’ Italy’s distribution of Recovery Fund monies. What next? Get the Mafia to re-organise the Ministry of Justice?
— Yanis Varoufakis (@yanisvaroufakis) March 8, 2021
And then he got to work reforming the country. He passed laws that will push for privatizing local public services, change the role of Italian municipalities, and transfer power from elected officials to bureaucrats at the Italian Competition Authority (ICA).
The law moves some legal proceedings from Italian courts to the ICA, introducing a secretive settlement procedure which can be used in cases concerning restrictive agreements and abuse of dominant position.
The law entrusts the ICA with the task of defining through its own internal processes the procedural rules and amount of fine reductions in the event of a successful settlement procedure. Any information about the proceedings does not need to be disclosed to third parties.
The ICA will also be granted oversight of privatization efforts. Municipalities will be required to submit reports to the ICA justifying why certain services are better served by remaining run by the state, and there will be periodic reviews of these reasons, as well as increased cost-monitoring.
The stated goal is to eliminate red tape “affecting the freedom of economic initiative.” Critics believe that cash-strapped municipalities will continue to have a hard time providing adequate services, which will then be privatized.
Starting next year the Ministry of Infrastructure and Sustainable Mobility will begin to exercise powers over regions if they have not “removed obstacles to the entry of new operators.”
Protests managed to beat back two of Draghi’s proposals that drew widespread attention. The first was opening up the taxi sector to competition from multinationals, namely Uber and Lyft. The second was an effort to do the same for management contracts of bars and restaurants along Italy’s 7,500 kilometers of coastline. The latter has long been a sticking point with Brussels.
Draghi still managed to navigate laws through parliament that will make labor more “flexible.” He made it easier for businesses to fire workers and hire temporary ones, continuing a disastrous trend:
“Italy needs to improve price competitiveness”.
The dark side of the policy mix to reduce labour costs in 🇮🇹is that real wages have declined strongly vis-a-vis 🇩🇪🇫🇷 while temporary employment has increased. This has weakened domestic demand, contributing to weak growth. pic.twitter.com/3WS30sesyO
— Philipp Heimberger (@heimbergecon) September 22, 2022
Despite COVID deaths in Italy being the second highest in Europe, he lifted major public health restrictions so that industrial production and tourism could return to normal. He tightened welfare access and raised the pension age. He cut taxes for businesses, which will likely result in more privatizations and social programs on the chopping block in the future to make up for the budget shortfall.
Draghi managed to pass much of his legislation despite barely engaging with parliament by tying it to confidence votes. That’s hardly surprising as the technocrat made it be known that he believed parliament was only there to rubber-stamp his decisions.
He also received surprisingly little pushback from organized labor. Maurizio Landini, the leader of Europe’s second largest trade union Italian General Confederation of Labor (CGIL), caved to Draghi earlier this year when he refused to stand up to such moves.
Instead the CGIL cited COVID and said “this is not the time to weaken the country and block the reforms.”
Draghi said the “reform path” started by his government means that the conditions will be there in the future for the EU recovery work to continue, regardless of who is in government.
In terms of economic policy, any new Italian government will have little room to maneuver. The EU Stability and Growth Pact (a set of fiscal rules designed to prevent countries in the EU from “spending beyond their means”) is suspended until 2023 due to the pandemic and the war in Ukraine. But by receiving funds from the Next Generation EU package Italy will be restricted on any future expenditure decisions.
Additionally, in July the European Central Bank launched its Transmission Protection Instrument, which allows it to do “whatever it takes” to close euro spreads and theoretically avert future financial crises.
Again any such assistance for Italy would be conditional on compliance with the EU’s fiscal rules and continuing with the “reforms” already locked in place by Draghi.
It’s worth remembering that during the 2011 sovereign debt crisis, it was Draghi as the president of the ECB who demanded a series of reforms from Rome, including:
- the full liberalization of local public and professional services through privatizations.
- to reform the collective wage bargaining system, allowing agreements at company level in order to tailor wages and working conditions to the specific needs of companies.
- a review of the rules governing the hiring and dismissal of employees.
- to tighten the eligibility criteria for retirement pensions.
- to reduce the costs of public employment by reducing salaries.
It took him another 11 years, but he finally accomplished most of what he wanted. For Italians it’s just another stop on the one-way journey to neoliberalism, one that Meloni and the Fdl is uninterested in doing anything about.
While the party is certainly nationalist, the hyperventilating over the six degrees of separation to Mussolini has distracted from the fact that the first two points of the Fdl coalition’s agenda are the “full adherence to the European integration process” and “respect for Italy’s international alliances.”
The unwillingness to challenge the EU or NATO is likely why someone like Hillary Clinton can say of Meloni “the election of the first woman prime minister in a country always represents a break with the past, and that is certainly a good thing.”
While Meloni has already started searching for wiggle room in the Next Generation EU funding for Italy, Brussels is having none of it. Many observers believe the Fdl coalition will likely pass some anti-immigrant legislation, but the country will continue to be governed from the outside, i.e., Brussels.
And so it goes. For nearly 30 years now the country’s politics have been characterized by a back and forth between technocracy and anti-elite populism.
Draghi was the fourth technocrat to lead an Italian government since 1993. The populists come in, are stifled by Brussels, a crisis ensues, and the technocrats ride to the rescue to push through neoliberal reforms.
The next crisis is already at the doorstep: Meloni and the Fdl are facing an economic catastrophe because of the energy crisis, and yet they have promised to continue sanctions against Russia and military support for Ukraine.
Draghi, of course, was a driving force behind the EU sanctions against Moscow that are now helping to destroy the Italian economy.
The average wholesale electricity price in Italy nearly quintupled year over year in August, jumping to 543 euros per megawatt-hour. Thousands of firms are at risk of bankruptcy in the near term.
Markets are already starting to get jittery about the sustainability of Italy’s debt. The increasing uncertainty comes as the ECB hikes interest rates and pauses its quantitative easing programs.
The ECB could resume its Italian bond purchases on a large scale, but German Bundesbank President Joachim Nagel made clear recently that any assistance would require more economic reforms.
Let the countdown to the next technocratic government begin.
Temporary, low-paid contracts now account for the majority of new jobs and 5.6 million Italians — including 1.4 million minors — currently live in absolute poverty, an all-time high.
Hey Germany! Look over here! The Goldman Sachs baby eaters are after you next!
MMMMMmmmm MMMmmm good! Babies, Yum.
“The stated goal is to eliminate red tape “affecting the freedom of economic initiative.” Critics believe that cash-strapped municipalities will continue to have a hard time providing adequate services, which will then be privatized.”
OMG think of the money to be made in bonds!
Thanks for this summary. I think that it is important for people / media denizens to stop hyperventilating about fascism and start focusing on economic and political problems as exemplified by Italy. (Although you do give me the task of writing that if Hillary Clinton is sending compliments to the fascista Meloni doesn’t that make Hillary a fascist, too?)
This line is a good summary of the strategy over the long term: “There is little movement in areas of broad support as such policies are blocked by EU rules on deficits. And neoliberal programs don’t garner support; they are therefore pushed through during times of crisis under non-elected governments like Draghi’s.”
With regard to the once broad-based and creative Italian left, I would note that the abject failure of Letta (personally) and the zombified Partito Democratico was almost embarrassing to watch. Except that I’d seen it before in the US of A with Hillary (fascist?) and the majority wing of the Democratic Party.
I’d also point out that three parties, with some 20 percent of the vote, ran to the left of the Partito Democratico: Five Stars (wowsers), Sinistra Italiana, and Unione Populare. M5S and SI did well. UP is brand new and wasn’t successful at getting seats in Parliament.
Meloni’s coalition partners, both of which support big business, are Lega (with the incredible shrinking Salvini) and Forza Italia (in which Berlusconi, in one of the oddest feats of the election, seems to have seated his new main-squeeze in a Senate seat from Sicily). Yet neither of these parties did well and are serious weak points of the four-party “Centrodestra” coalition.
Recall, though, that Meloni ran as an “Atlanticist” who is pro-NATO. The idea that Italians have challenged the EU through the Fratelli d’Italia is a tad awry. The only challenge in the offing is blocking refugees / migrants in the Mediterranean.
Think of Meloni as part of the Liz Truss, Teresa May, Margaret Thatcher, Hillary Clinton, Liz Cheney realm.
Traditional social-democrat parties have become EU-market rules compliant meaning this they are no longer social and collaborating in the erosion of labour bargaining power. They buy stupid 3rd way ideas such as flex-security. Meaning this the more flexible is your job (easy firing, less social contributing, retiring later) translates in more secure jobs under market rules. The more insecure, the more secure, isn’t it?
With such contradictions in the backpack plus the fiscal and monetary straitjackets these parties have very little to offer (zombified as you say) and are poised to let down their electorates. So we see this slow erosion in election participation as political options are erased by market consensus. Even the most creative left parties are poised to let down as these are not allowed to make for a difference. They always have the Damocles sword above them. The electorate ‘feels’ they will be let down again and again. Only final options to break ranks are those of Meloni and the like.
As you point out, one of the fundamentals of the EU is smashing the power of labor. In every EU country, labor unions are on the defensive, even in countries like Italy with highly active labor movements with wide support.
And yes to your observation: “So we see this slow erosion in election participation as political options are erased by market consensus.”
In Sicily, this has gone so far that the Sicilians have been electing politicians who seem to hate them. It’s a kind of democratic masochism (along with the hangover of Sicily’s long, strange history).
I am afraid that Italians will soon discover that Meloni rhymes with baloney.
Another excellent post by Mr Gallagher and special attention should be drawn to
Which could not be more spot-on.
Although I do feel a clarification is needed about the reference to ‘absolute poverty’ further above. In line with EU statistics standards, Istat defines absolute poverty as not being able to ‘afford the basic basket of goods and services’. Essentially this is horrid and a result of the neoliberalism Gallagher correctly decries, but I would like to put it in a bit of context.
In my neck of the woods, absolute poverty means you do not eat tomorrow and are living on the street. In the more northern climes from which most of you are reading, absolute poverty means no health care, no housing, no credit, etc. And there are other countries more destitute than ours. By contrast, from what I have seen in the EU absolute poverty means (at least until Draghi &Cº. finally have their way) you live in council housing, get free health care and have to buy boxed Dolcetto instead of Barolo. In short, countries like Italy have a social safety net that is under siege but is still much more than most countries have.
This difference may seem like statistical nitpicking, but of late I have seen much comment on the internets (egads!) that the EU’s self-sanctions will lead to bread lines of shivering masses who will forthright uprise against their neocon lords. And they very well may. But my personal experience tells me, much to my chagrin, that it takes a good load of suffering before that actually becomes concrete.
I can easily see how the EU is fast-tracked to the social net poverty of the US, but with all due respect, I haven`t seen many Cochabamba Revolts in the US to protest being crushed by neoliberalism where the assault on workers is longer lived and more sustained, so you (and Vladimir Vladimirovich) will forgive me if I don’t hold my breath.
And again, this is just a clarification and should not detract from what really is a must-read post.
RabidGandhi, appreciate the good words and the point on absolute poverty. My Italian is still a little rusty at times.
People in the US are far more propagandized than even they are aware. When they get technocratically robbed/raped/etc, their first impulse is to always blame their work ethic, then perhaps immigrants… it’s a process. So they are always misdirected from whatever might enact change.
Absolute poverty is a homeless dog in Siberia trying not to freeze to death or starve death in winter, or fall prey to contract killers.
Despite all the media portrayals of Meloni et al as far-right (or even neo-fascist), I doubt much will change in Italy in the short term, for the reasons outlined succinctly in this article. By USA standards, I would rate the likely new government as moderate southern democrats or country club republicans; the odds of radical reform are near zero. But in the long run (let’s say 20 years and up), Italy’s present drifting course is unsustainable. Italy either carries out deep neoliberal reforms across its entire society, or it quits the eurozone and reverts to money printing and devaluation like it did in the old days (during which Italy prospered, just sayin’). I would bet on the latter happening eventually, but not now. Things will have to get much much worse before a majority of Italians are ready to quit the euro, and for now (pre-winter, I admit) Italy remains a beautiful and wealthy country with a high quality of life.
And quitting the Euro is not easy as was discussed here at NC when Greece was under the gun.
And yet– Meloni, who, according to the Financial Times, is a high school graduate that lives with her partner and young daughter, and had the guts to break with Italy’s mainstream conservative movement back in 2012 to launch Brothers of Italy. This party only received 4% of the vote in the 2018 general elections but by 2022 had become Italy’s most formidable political force (primarily through her charisma, networking ability and a tireless work ethic).
If you have ever heard her speak, you would not be able to deny the authenticity of her voice. While Conor may prove ultimately correct about her final trajectory (taken all the EU institutional constraints) I’m placing my money on this right populist long-shot who continues to claim that she will “…never be the perfect slave of financial speculators…”
My in-laws did a month long vacation in Europe about five years ago when they finally retired and came to the conclusion that America was a third world country based on what they experienced. (He especially like the Amalfi coast.) He is very conservative, normally votes Republican, etc.
He pretty much came to the conclusion that he had been lied to all his life with regard to what governments can provide for their people. You may not realize it, but experiencing Europe changes minds. It would be a shame to lose it all at this point.
Gulag is right to marvel at Meloni’s rapid upward trajectory. I recall thinking, watching RAI news, that they spend an awful lot of time covering her when she’s getting only 2%, then 4% in polls. She’s a fascinating visual subject—much of the time with no makeup, stringy dyed blond hair looking as if it needed a wash, often in baggy t-shirts, charging around like a little terrier, yet almost always center of attention in a gaggle of male pols. Her voice has force but so does her style. She has an easy laugh too, which most of them don’t have.
Last night on Flores’s show, di Battista (i think), who’s no Fratelli, said something like, ‘whenever I hear Letta (head of PD) talking, I’m always thinking, ‘ok, I’m gonna to vote for Conte or Meloni.’
Italy needs to plan for a multi-year project to return to the Lira.
They won’t, and they probably can’t, but they need to.
All German sado-monetarism creates is a fascist friendly polity.