As the fourth largest European economy goes to the polls Alastair Stephens looks at the background to another potential crisis for the Euro and austerity

The Italian general election, to be held on February 24th and 25th, will probably be the most important election to be held in Europe this year.

There will also be one in Germany in the autumn. And even if this is not the shoe-in for Merkel that had been expected, it is unlikely to lead to any real shift in policy.

Nor is the Italian election, but for different reasons. However it is precisely this lack of change of direction that threatens to either sink the Euro or break the austerity consensus.

Of all the big European countries (it has the fourth largest economy) Italy is the one with deepest and most intractable economic problems.

The Great Recession and the subsequent ‘debt crisis’ merely turned a chronic sickness into an acute condition. Italy is in its third recession in five years and has barely grown in fifteen. Few new jobs have been created, and those that have are precarious. Young Italians are again emigrating in large numbers to escape a youth unemployment rate of 37%.

The present austerity being implemented in Italy is not improving the situation. But if the crisis deepens any further it could tip Europe over the edge.

Put simply, Italy is too big to fail, but is also too big to bail out.

The story so far

An early general election was forced in December when Silvio Berlusconi’s People of Freedom party (PdL) withdrew support from Prime Minister Mario Monti’s unelected government of bureaucrats, academics and bankers.

Monti, a professor of economics (often referred as “The Professor” in the Italian media), a former European Commissioner and all-round representative of the international financial elite, had been put into power eighteen months previously after the financial markets and other Eurozone governments, in particular Germany’s, decided it was time for Prime minister Berlusconi to go.

Once hailed as the saviour of the Italian ruling class, stepping in to save them when their party, the Christian Democrats disintegrated in the early 1990s, Berlusconi had proved to be rather more interested in protecting his own business interests than in implementing neoliberal reform. In fact little reform of any sort happened during his three premierships.

Thus in the summer of 2010, as contagion from the Greek debt crisis threatened to spread through the money markets to Italy, he was dumped and Monti, who had never stood for election, was appointed in his place.

Millions of Italians, and in particular Italian women, heaved a sigh of relief that the great clown, so mired in sleaze that even the Catholic Church had turned against him, seemed finally to have gone. Yet the fact remains that an elected government had been replaced with an unelected one at the behest of the financial markets and European Central Bank in a kind of “soft” coup. It was an ousting which had also been facilitated by the President of the Republic, Giorgio Napolitano, a veteran leader of the Communist Party (PCI) and its successor the Democratic Party (PD). There could have been elections, which would most likely have been won by the Democrats, but that wasn’t what the ECB, Merkel or Italian big business interests wanted.

Instead Napolitano asked ‘The Professor’ to form a government.

Monti quickly set about his appointed task: using the fear of default to implement a program of neoliberal shock therapy. Austerity was imposed and an assault begun on all the gains the Italian working class had won since the fall of Fascism in 1944.

Back from the dead

Of all the things troubling Monti, a comeback by Berlusconi should not have been one of them.

All the more so given Berlusconi’s legal woes, including a trial for paying for sex with an underage prostitute (‘Rubygate’) and his conviction in October for corruption (against which he is appealing).

However il Cavaliere (‘The Knight’ as Berlusconi is known) still had some cards to play such as his control of much of the Italian media, his undoubted skills as a demagogue and the undemocratic way in which he was removed, seemingly at the behest of foreign powers.

In fact he has made something of a comeback. He regained control of his party and revived his alliance with the Northern League, a far-right and regionalist party, itself brought back from the brink by Roberto Maroni after its previous leader and founder Umberto Bossi (‘il Senatur’) had been brought down by a corruption scandal.

Berlusconi was soon back to his old ways, railing against foreign interference, austerity and generally hogging the limelight. No other major politician could get away with falling asleep at the Holocaust Memorial Day ceremony, then waking up only to praise Italy’s own Fascist dictator Benito Mussolini, who sent thousands of Jews to the gas chambers. Somehow he managed to turn gaffe to his advantage, despite it widely being believed to be a cynical election stunt.

The Professor enters the fray

In many ways this election has been a duel between ‘The Knight’ and ‘The Professor’, each bidding for leadership of the right.

Following his ousting as PM, Monti kept everyone guessing before finally deciding to enter the field of political combat.

He is now standing as the head of an alliance of parties usually known as the ‘Third Pole’. Often referred to as the ‘centre’ of the Italian political spectrum, it is no such thing. Liberals of any sort other than the strictly economic, are thin on the ground. The major component is in fact the UDC, the remnants of the once mighty Christian Democratic party, which ruled the country for half a century, until it was brought down at the start of the nineties by the avalanche of corruption scandals known as Tangentopoli (‘Bribesville’). The second largest component of the alliance is Future and Liberty of Italy, led by the former fascist party leader, Gianfranco Fini. Neither of these bedfellows reflect well on The Professor or his Mr. Clean image.

Fini was the last person to contest Berlusconi’s position as leader of the right. He merged his party with Berlusconi’s, and moved away from his Fascist roots towards the centre, in an attempt to become its ‘acceptable face’, only to be chewed up and spat out by Berlusconi and his corporate machine.

Monti’s challenge has not gone much better with his alliance bumping along at 10-15% of the in the polls.

Scandals, scandals, scandals

One of the few things to have enlivened an otherwise lacklustre campaign has been a slew of new scandals. One involves alleged bribery at Finmeccanica, the giant defense contractor whilst another is shaking the national oil and gas company ENI.

But the one which has really impacted on the election is the scandal at Italy’s third largest, and the world’s oldest, bank, Monte dei Paschi di Siena.

Monte Paschi, as it is known, was revealed to have made massive losses through a takeover of another bank in 2008 and dodgy derivatives deals. As per usual with scandals in contemporary banking, the details are fiendishly complex.

But it seems to most people to be just another example of the corruption of high finance and the determination of the political class to cover it up and bail it out. Thus far the affair has managed to drag in The Professor, Mario Draghi (the current head of the European Central Bank, and former head of the bank of Italy), and even the Vatican.

A lacklustre left

The biggest loser in the Monte Paschi scandal so far though has been the Democratic Party.

The bank’s hometown of Siena is in the so-called Red Belt of regions in central Italy controlled for decades by the Communist Party, and still dominated by its successor the Democratic Party. The local government has close ties to the bank and many of its board are political appointees.

Not only does the PD look guilty by association but lurid tales are circulating of tens of millions of Euros siphoned off to provide a slush fund for the party.

The scandal broke what momentum the lackluster PD campaign had, and in the last legal opinion polls before election day it was only five points ahead of Berlusconi’s party.

The PD has not had a good campaign, Pier Luigi Bersani, the centre-left’s candidate for Prime Minister, is a poor television performer, and has been nicknamed ‘Gargamel’ for his likeness to the Smurfs’ nemesis.

He had won the nomination of the centre-left Italia Bene Comune coalition in primaries last autumn. In the final round of voting he won a clear victory against the candidate of the right of the PD, Matteo Renzi, but with the support of the powerful trade union confederation CGIL and Nichi Vendola’s SEL party. This caused him to tilt to the left.

He has been tilting back ever since suggesting that he might be in favour of a deal with Monti, whatever the outcome of the election. Apparently all ‘progressives’ need to unite against Berlusconi and ‘Leaguism’. The language of the Popular Front of the 1940s and the Historic Compromise of the 1970s is again being deployed to justify a deal with the right.

The radical left: rise and fall, and rise again?

An alliance with Monti, and continued austerity, is something opposed by the Left Ecology Freedom party (SEL) led by Nichi Vendola, Italy’s most prominent gay politician and the governor of the poor southern region of Puglia. In turn Monti has called on Bersani to dump his left-wing ally.

How far SEL will go in opposing such an alliance is questionable. It split from Rifondazione Comunista (Party of Communist Refoundation, PRC) in the aftermath of its electoral wipeout in 2008. This debacle was the result of two unhappy years in government as a junior partner of the PD following the election of the centre-left Unione coalition in 2006.

The previous five years of participation in the anti-war and anti-globalisation movements had seen the PRC radicalise and its vote rise along with growth of the social movements. But in the general election of 2006 it ran as part of the Romano Prodi’s coalition. It received 2.2 million votes (5.8%) and 41 seats in parliament. However the price of the one ministry, and speakership of the Chamber of Deputies, was its MPs having to vote for neo-liberal reform and continued participation in the occupation of Afghanistan.

The government fell after just two years, (brought down not by the left but by one of Prodi’s right wing coalition partners over a corruption scandal). In the resulting election the PRC ran as part of the Rainbow Left list in combination with the PdCI and the Greens (both of whom had also been part of the Prodi’s government). The left’s voters however had become disillusioned by these parties’ seeming betrayal of causes they had previously stood for. The result was a collapse in support. They lost 70% of their support compared with election two years previously, dropping from a combined total of 3.9 million votes to 1.2 million.

The most of the PRC, recoiling from this experience, turned away from the idea of alliances with the centre-left. Those that continued to stand for this, led by Vendola, lost the vote at the party’s congress, and left to form SEL.

If the PD were now to cut the SEL loose in favour of an alliance with Monti it would seem like the revenge of history. The alternative for SEL would be to capitulate, as the then leader of the PRC Fausto Bertinotti did in 2006, and risk the revenge of the electorate instead.

The PRC is making its own bid to re-enter parliament as part of the Civil Revolution list headed by anti-mafia magistrate Antonio Ingroia. This is the latest manifestation of an electoral alliance between the PRC, PdCI and Greens which has become semi-permanent since 2008. The PdCI (Party of Italian Communists) broke away from the PRC in 1996 for exactly the same reasons as SEL did a decade later. Now though, rather than trying to be elected into government with the PD, they are just trying to be get back into parliament, but this time as junior partner to the PRC, the party they split originally split from.

Italian politics is so full of ironies such as this, it’s surprising that anyone takes it seriously any more. Increasing numbers of Italians don’t, which has led to the rise of yet another anti-establishment party.

A shooting star, soon to fade?

The wild card in election is the Beppe Grillo’s Five Star Movement (M5S). For once the use of the possessive is completely appropriate. M5S is probably the purest example of leaderismo in contemporary Italian politics. Grillo controls the party absolutely. This is somewhat ironic given its supposed anti-politician stance.

Beppe (as he is always referred to) Grillo is a comedian and blogger who made his name in the 1980s by referring to the Socialist Party (then in coalition with the Christian Democrats), as thieves. (This was possibly too kind a description of many of its leaders, given what later emerged in Tangentopoli. The former Socialist Prime Minister, Bettino Craxi, fleeing into exile in Tunisia after being pelted with coins by angry demonstrators and being pursed by numerous criminal investigations.) Still, Grillo was banned from television, and his name was made. He took his show onto the road and has been lacerating the political class, sometimes referred to as ‘The Caste’, ever since. Eschewing television, he built first a movement, then a political party, through street rallies (of which his ranting self is the centre) and giving voice to rising levels of disgust at a political class that is neither able to change Italy or itself.

He certainly has enough material to go on. No other country in Europe has suffered quite so many scandals and yet left its politicians so unchanged. Parties seem to come and go with a speed too great for most people to keep up with, yet there are always the same faces. Hence in a country that has 37% youth unemployment rate, the three leading contenders for Prime Minister, Berlusconi, Monti and Bersani, are 75, 70 and 61 respectively. It is things like this that has brought so many young people towards Grillo (who is, one may note, himself 64).

A decade ago most of these young people would have been attracted towards the PRC and the then rising social movements, a phenomenon which was stopped dead in its tracks by the left’s spectacular own goals of 2006-2008.

Grillo’s movement is far to the right of these though. He has also openly flirted with the genuinely Neo-Fascist Casa Pound movement and said that trade unions and parties were “old structures” which they will “eliminate”.

By entering electoral politics though Grillo could be making a Faustian pact. His support could be destroyed by becoming part of the thing he decries, the political elite. M5S is expected to reach 10%-15% thus winning a good wedge of MPs. There is little though to stop his new politicians from acting like the old. Certainly they are not going to be held down by any ideology or real social base.

Pork barrel politics, Italian style

The outcome of the election will also be in part be decided by an electoral law derided even by its own author, the Northern League MP Robert Calederoli, as a “pig sty”. It has now though been rebranded by the papers with the rather more Latinate, and thus respectable, name of the Porcellum. Among its many anti-democratic provisions, it awards to the coalition of parties receiving the largest vote 55% of the seats in the lower house of parliament, the Chamber of Deputies.

This should give Bersani’s alliance a comfortable majority there. However in the upper house, the Senate of the Republic, which has equal powers to the lower house, this same principle is applied at a regional level.

The provinces of Lombardy and Veneto have nearly a quarter of the seats in the Senate between them, and look likely to be won by Berlusconi’s right wing alliance. Lombardy is also having regional elections at the same time in which the Northern League leader, Roberto Maroni, is standing for governor. To win he needs the support of Berlusconi’s party. It is this in part which has driven the deal at a national level between the two parties.

It is looking increasingly unlikely that the centre left coalition will have a majority in the Senate making Bersani, even if he wins in the lower house, dependent on Monti in the Senate to get any legislation through.

No end in sight

It looks like Bersani will be the next Italian Prime Minister. But it also looks likely that he will do a deal with Monti. Using the convention for the naming Italian governments, we could say that Bersani I may in reality be more like Monti II. Austerity looks set to continue, as does neoliberal reform of the labour market.

The Economist magazine, that flag bearer of neoliberalism, is so confident of this that it welcomes a victory for the centre-left, arguing that austerity under Romano Prodi’s government of 1996-1998 got Italy into the Euro and that his second administration of 2006-2008 (the one we may note which took Rifondazione onto the rocks) was the only one, until The Professor came to power, to actually liberalise the economy. And the minister for deregulation in Prodi II? Pier Luigi Bersani.

Austerity this time round has only sucked demand out an economy already flatlining. Businesse is not investing whilst the economy stagnates and unemployment has remained high, especially amongst the young. In fact Italy is one of only two countries in the Eurozone in which real GDP per head has fallen since joining the single currency.

Even if Italy does not bring the Euro crashing down through increasingly desperate measures to stay in (as has happened with Greece) then it could do so by withdrawing. Berlusconi has already raised the prospect of withdrawal, something previously unmentionable among a ruling class that is normally fanatically pro-EU. Unless growth starts again soon though it is an idea that could gain quickly support as people lose faith in their rulers’ European project. Italy is not Greece and would have rather more faith in its ability to go it alone.

Italy is not Greece in a number of other ways. It is still one of the largest and most sophisticated economies in the world. It is not yet a basket case. Its banking system was relatively unaffected by the Credit Crunch, despite the Monte Paschi scandal. Its financial system isn’t full of zombie banks (unlike Britain’s). It may have the largest national debt in Europe at 130% of GDP but (again unlike Britain) it has relatively high personal savings and low levels of personal debt. It still has a strong industrial base (yet again unlike Britain).

It is this last factor that in part helps make Italy the weak link in the European chain. It possesses a working class movement that is still strong and relatively combative. Union leaders, such as CGIL’s Susanna Camusso, are public figures in a way in which no union leader in Britain is. Though relatively quiet in recent years (by Italian standards) the unions have led major mobilisations against austerity.

A new wave of struggles could be difficult to contain. The political system has never managed to restabilise itself since the disintegration of the old party system in the early 1990s which saw the two dominant parties of the post war era, the Christian Democrats and the Communist Party break up. Neither of their replacements, the PdL or the PD, have proved to be fit for purpose, either as parties of government or opposition.

If austerity is to be brought to grief on the rocks of working class resistance, the place where this is most likely to happen first in Europe, is at the moment, Italy.

The Italian crisis is by no means over, and may only just be beginning.