Deadlock Looms After Italians Return Divided Parliament

Rome, Italy at night, June 20, 2009
Rome, Italy at night, June 20, 2009 (lessandro Martino)

Former prime minister Silvio Berlusconi’s right-wing coalition emerged from Italy’s two day election with a plurality of the seats in the Senate while the left-wing Partito Democratico and its allies took control of the lower house of parliament.

The Southern European country that just over a year ago seemed to teeter on the brink of sovereign default entered a period of political instability if not paralysis as neither the right nor the left looked able to form a government.

A telephone survey published immediately after polls closed on Monday suggested that the left would win majorities in both chambers of parliament but projections in European and Italian media soon thereafter had it virtually tied with Berlusconi’s coalition in the upper chamber.

The left’s struggle to take control of the Senate was predicted in preelection polls. Unlike is the case in the lower chamber, where the party with most votes nationally gets the majority, winners’ bonus seats in the Senate are awarded on a regional basis. Berlusconi formed an alliance with the federalist Lega Nord in order to increase his chances of winning the elections in the northern industrial regions of Lombardy and Veneto which elect 73 senators between them.

Other battleground states included Campania and Sicily in the south which account for 29 and 25 Senate seats, respectively. Berlusconi’s Il Popolo della Libertà carried both regions in the last election.

While many Italians blamed Berlusconi for their nation’s economic predicament when he resigned amid rising borrowing costs and personal scandals in November 2011, the fiscal policies implemented by his successor, the former European commissioner Mario Monti, have been deeply unpopular. Monti raised taxes and reined in public spending, including central government subsidies for Italy’s many layers of government, to the chagrin of especially property owners and local party machines.

Dissatisfaction with Monti’s reform efforts, however lackluster, boosted support for Berlusconi’s conservative party, which rallied against what it described as the incumbent premier’s “German” austerity program, as well as comedian Beppe Grillo’s anti-establishment Five Star Movement which got a plurality of the votes in several regions, including Sicily.

The Five Star Movement won 54 Senate seats in total, making it nigh impossible for either camp to govern without it unless, as Grillo suggested Monday night, Il Popolo della Libertà and Partito Democratico forged a grand coalition. That may only be possible if Berlusconi stepped aside.

International newspapers, including the Financial Times, tended to interpret the Italian election result through the prism of rising Euroskepticism. It described the outcome as “a clear basta to austerity” and quoted Enrico Letta, deputy leader of the Partito Democratico, as saying, “The absolute majority of Italians have voted against austerity measures, the euro and Europe.” He added: “This sends a very clear signal to Brussels and Frankfurt,” the seats of the European Commission and the European Central Bank.

Günther Nonnenmacher, a political editor for the liberal Frankfurter Allgemeine Zeitung, similarly called the vote a “warning sign” for the rest of Europe. Monti, “the man who enjoys so much prestige abroad,” was punished for the austerity policies he enacted while half of Italians voted for parties that are “aggressively anti-European.”

Stefan Kornelius was more blunt in his report for the leftist Süddeutsche Zeitung, characterizing both Berlusconi and Grillo as “comedians” who deny the realities of Italy’s fiscal crisis; “are shifting the blame for the misery on enemies abroad and talk about simple solutions to all problems.”

How could this happen? Because serious politicians like technocrat premier Mario Monti and the left-wing candidate Pier Luigi Bersani hesitated, hummed and hawed and did things by halves.

German weekly Der Spiegel observed that Berlusconi’s and Grillo’s parties, which command a majority in the Senate between them, will be able to make life difficult for a centrist or left-wing coalition. “They can’t stand each other but they are both against Europe, against ‘those in Brussels,’ against the ‘diktats from Berlin.’ Consequently, they are against everything a Bersani government now wants to and has to do.”

New elections may be needed to break the gridlock. The conservative French newspaper Le Figaro even forecast the end of the “Second Republic,” an informal term to describe the period since the collapse of the country’s once dominant Christian Democrat and communist parties in the early 1990s. A similar party realignment could be imminent after Italians so massively vented their anger at the present political class by voting for Grillo’s Five Star Movement.

Italy’s Left Struggles to Take Control of Legislature

Secretary of the Italian Partito Democratico Pier Luigi Bersani speaks in Turin, Piedmont, August 28, 2010
Secretary of the Italian Partito Democratico Pier Luigi Bersani speaks in Turin, Piedmont, August 28, 2010 (Francesca Minonne)

Although Italy’s largest left-wing party is expected to emerge with a plurality of the votes from Sunday’s and Monday’s election, it will likely struggle to take a majority in the upper chamber of parliament where centrist parties that otherwise support the reelection of incumbent premier Mario Monti could be kingmakers.

Monti, a former European commissioner who assumed the prime ministership in late 2011 when Italy seemed to teeter on the brink of sovereign default, resigned in December when the right-wing Il Popolo della Libertà, led by his predecessor Silvio Berlusconi, pulled its support from his cabinet of unelected technocrats.

The conservatives cited a collapse in home sales as a result of a new property tax, continued economic stagnation and tepid labor market reforms that were watered down under pressure from the country’s trade unions and the left as reasons for withdrawing their support from the government.

Berlusconi has since campaigned against Monti’s economic and fiscal reforms, promising to scrap the property tax and take no orders from Berlin which he claims dictates the incumbent’s austerity program. Germany insists on fiscal consolidation and economic liberalization in the south of Europe where countries have seen their debts and borrowing costs rise in recent years, threatening the stability of the single currency.

The anti-German rhetoric appears to resonate with part of the Italian electorate. Whereas the left-wing Partito Democratico, which also backed Monti’s reform efforts, enjoyed a 15 percentage point lead in preelection polls as recently as early January, some of the latest surveys from before a ban on opinion polls went into effect showed Berlusconi’s party and the federalist Lega Nord, which propped up his previous governments, trailing by just 5 percentage points.

Partito Democratico‘s leader Pier Luigi Bersani has only to squeeze out a minor victory for the left in order to gain a majority in the lower house of parliament where the biggest party automatically gets the most seats.

In the Senate, however, winners’ bonus seats are awarded on a regional basis and the two camps are close to a draw in several battleground regions, including Lombardy and Veneto in the north which between them elect 73 senators. Berlusconi formed an alliance with the Lega Nord in order to boost support for the right there.

Bersani still has the best chance of becoming prime minister but might have to sacrifice his alliance with the far-left Sinistra Ecologia Libertà if he is to draw Senate centrists into a coalition. Sinistra Ecologia Libertà did not support Monti’s reforms and party leader Nichi Vendola has dismissed the possibility of joining a coalition that includes the incumbent premier as “fantasy politics.”

Monti, for his part, has all but ruled out a coalition with the right as long as it is led by Berlusconi. He told Italian radio last month that he had “no intention of making any agreement with parties that aren’t strongly reformist” but also said that he could “easily imagine a collaboration” with Il Popolo della Libertà if Berlusconi stepped down.

South Tyrolean Separatists Reject Left-Wing Alliance

The Vinschgau Valley in South Tyrol, Italy, August 10, 2009
The Vinschgau Valley in South Tyrol, Italy, August 10, 2009 (Davide Bedin)

When Italians elect a new parliament later this month, a German-speaking minority in the far north of the country will be contemplating secession. As in other wealthy regions in Europe, inhabitants of South Tyrol feel that they’re unfairly paying for the revitalization of the rest of the nation’s economy.

Separatist sentiments in South Tyrol, which was part of Austria until after the First World War, are hardly new. The Südtiroler Volkspartei has long dominated local and regional politics. It controls three out of five municipalities in the region and commands a majority of the seats in the regional legislature. But its willingness to cooperate with mainly left-wing parties at the national level threatens to erode its support in favor of fringe independence parties on the right.

The Volkspartei is a “big tent” party. Like the Lega Nord, which seeks independence for the whole north of Italy, it has long garnered support from Christian and Social Democrats as well as conservatives. Unlike the Lega, which propped up former Italian prime minister Silvio Berlusconi’s administrations in the past, the South Tyrolean party has recently leaned more to the left. For the sake of February’s parliamentary election, it joined Pier Luigi Bersani’s left-wing alliance. Polls predict that the latter’s Partito Democratico will win a plurality of the seats in the lower chamber of parliament, enabling Bersani to claim the prime ministership.

Right-wing populists in the German-speaking region are critical of what they perceive as the Volkspartei selling out to national political interests. It has allowed itself to be “an extension of a national party that will only serve the interests of the state, not those of South Tyrol,” said Eva Klotz of the Südtiroler Freiheit party last month. Südtiroler Freiheit, which is gaining in popularity among right-wing voters, advocates an independence on South Tyrolean independence.

The separatists are emboldened by recent moves on the central government’s part to consolidate tax and spending policies. The region was granted autonomy under Italy’s 1947 constitution and further powers were delegated to the regional government in 1971. Prime Minister Mario Monti, who took over from Berlusconi in November 2011 when Italy seemed on the brink of a sovereign debt crisis, has tried to force provincial administrations to rein in spending and reduce waste. Debt free South Tyrol is recalcitrant. Its governor, Luis Durnwalder, told the Austrian newspaper Die Presse late last year, “We understand the need for cuts and we must cut as well. What we cannot accept is that we are told where to cut.”

The added political interference from Rome, which all of Italy’s provinces endure, is particularly hard for South Tyrol to accept as it suffers none of the deficit spending and corruption that is present in many other parts of the country.

Similarly, the whole north of Italy resents paying extra taxes and seeing public-sector spending reduced when it’s the largely agrarian and more corrupt south where politicians have for years failed to make ends meet. Hence the popularity of the Lega Nord.

In Catalonia, Spain and Belgium’s Dutch-speaking Flanders, similar separatist movements have grown or sprung up in recent years. In the former, secessionist parties won a majority of the seats in the regional parliament in November of last year. They intend to call a referendum on independence as well, although the central government in Madrid insist such a vote would be illegitimate. The Flemish nationalists won more than a quarter of the votes in the north of the country in 2010 and emerged as the largest party from local elections held in October.

What these separatist movements have in common is that they appeal to conservative voters who consider themselves more frugal and industrious than their supposedly spendthrift neighbors, a perception that can be observed in Europe at large in countries that feel they are bearing the brunt of saving the single currency union while little progress toward fiscal consolidation and economic reform appears to be made in the south.

If, as polls predict, the Italian left with support from the Südtiroler Volkspartei wins next week’s election and preserves the budget policies of the incumbent administration, the smaller Südtiroler Freiheit might well endear itself to even more German-speaking voters who would rather their region be free of Rome’s interference altogether.

British, Germans Fear Italians to Return Berlusconi

German finance minister Wolfgang Schäuble confers with his Spanish and French counterparts Luis de Guindos Jurado and Pierre Moscovici during a meeting of eurozone finance ministers in Brussels, July 9, 2012
German finance minister Wolfgang Schäuble confers with his Spanish and French counterparts Luis de Guindos Jurado and Pierre Moscovici during a meeting of eurozone finance ministers in Brussels, July 9, 2012 (The Council of the European Union)

The German finance minister Wolfgang Schäuble was quoted on Friday as saying that Silvio Berlusconi’s return to the premiership would “weaken Italy and weaken all of Europe.” He added: “My advice to Italians is not to repeat the error already made and not to continue voting him.”

Even if a spokesman for Schäuble denied that he had said the exact words in an interview with the Italian L’Espresso magazine and his Christian Democrat party belongs to the same political family as Berlusconi’s right-wing Il Popolo della Libertà, the Germans much prefer a centrist or left-wing government in Rome that continues the reforms enacted by Prime Minister Mario Monti last year. “Bersani,” said Schäuble, referring to Italy’s leftist prime ministerial candidate, “told me he wants to continue on the path started by Monti and this is what is important for me.”

The Economist would also rather either Pier Luigi Bersani or Monti, if not both, rule Italy. Although the former is in alliance with the far left, which opposed many of Monti’s economic and fiscal reforms, “Bersani also has a reasonable record as a reformer in past governments,” according to the liberal British newspaper.

Deeper reforms are needed as Monti, who took over from Berlusconi in November 2011 when Italy seemed to teeter on the brink of sovereign bankruptcy, failed to thoroughly liberalize his country’s economy. Through tax increases and a raise in the pension age, the budget was put on a more sustainable trajectory but Monti’s program of economic modernization has been tepid.

Labor market reforms, which should have made it easier for firms to hire and fire workers, were initially delayed, then watered down under pressure from the nation’s powerful trade unions as well as Bersani’s Partito Democratico whose support Monti needed for his majority in parliament. The far-left Sinistra Ecologia Libertà, Bersani’s main ally, voted down the reforms altogether and has dismissed the possibility of ever forming a coalition that includes the incumbent premier as “fantasy politics.”

Monti similarly backpedaled on proposed drugstore and taxi market reforms. Thousands more pharmacies were supposed to be added but union opposition forced the government into retreat. Efforts to lift professional restrictions on attorneys were halfhearted. Minimum tariffs imposed under Berlusconi’s administration were abolished but in order to compensate lawyers, a maximum was set on the number that can be employed in the industry, making it even harder for law graduates to start a business.

Retailers have been the only real beneficiaries of the government’s reforms. Legally mandated shop hours and sales periods have been abolished, if to the chagrin of small businesses who fear that they will not be able to compete with chain stores.

Italy’s public debt remains among the highest in the world at nearly 130 percent of gross domestic product. Labor costs are also still high. Whereas in other Mediterranean countries, they have fallen since the start of the sovereign debt crisis, in Italy, wages have continued to climb.

The Economist warns, “If the eurozone’s third biggest economy and its largest public debtor cannot reignite growth and generate new jobs, Italians will eventually lose hope or their northern neighbors will lose patience.” Dutch, Finnish and German voters are increasingly frustrated about the seemingly lackluster pace of economic modernization in the south. If Italy fails to make progress in years to come, it is not difficult to imagine the electorates in the more competitive north of the single currency union simply giving up on the whole project.

Yet Berlusconi, who is in alliance with the separatist Lega Nord, has flourished in preelection polls as he intensified his criticisms of German austerity. In a television interview last month, he touted his willingness to stand up to German demands as prime minister. “I was one of the two, three most influential leaders in the European Council,” he said. “I continuously opposed German proposals and demands.”

He also urged the European Central Bank, chaired by the Italian Mario Draghi, to print more money so countries in the south of Europe can finance their deficits in the absence of private-sector funding. The Germans would be extremely apprehensive of such an activist monetary policy for fear of driving up inflation.

If the ultimate consequence of a disagreement over fiscal or monetary policy is Germany or Italy leaving the eurozone, Berlusconi said last summer that it would “not be the end of the world.”

In the last surveys released before a ban on election opinion polls came into effect last week, Berlusconi’s right-wing alliance was at 29.7 percent while Bersani’s left-wing parties were at 37.2. The centrist parties that support Monti’s reelection got nearly 13 percent of the votes in the ISPO poll. If neither the right nor the left secures an outright majority, Monti’s backers could be kingmakers, especially in the Senate where elections are not entirely proportional.

Berlusconi Makes Italians Offer They Can’t Refuse

Italian prime minister Silvio Berlusconi arrives for a European Council meeting in Brussels, October 26, 2011
Italian prime minister Silvio Berlusconi arrives for a European Council meeting in Brussels, October 26, 2011 (The Council of the European Union)

Italy’s right-wing leader Silvio Berlusconi on Sunday promised sweeping tax reductions if his party is elected to government later this month. Notably, he advocated the elimination of a hated property tax implemented by incumbent prime minister Mario Monti, something he said “will restore public trust in the state.”

In a passionate address to supporters in the northern city of Milan, the septuagenarian former premier said that he would scrap the tax and refund payments already made. He also promised that a conservative government would eliminate a regional business tax and cancel plans to raise the value-added tax and impose a wealth tax on rich Italians. The decline in revenue should be offset by deeper cuts in government spending, including the public financing of political parties.

With three weeks to go before parliamentary elections are due to take place in Italy, Berlusconi has managed to boost support for the right-wing Il Popolo della Libertà in the polls. His coalition with the separatist Lega Nord trails the left-wing parties led by Pier Luigi Bersani by just 5 percentage points in one recent survey. The left enjoyed a 15 point lead as recently as early January.

“We are one step away from victory,” Berlusconi was quoted as saying on the website of his party. “The left is afraid. They are losing sight of victory which they thought was in the bag.”

Berlusconi rallies against the austerity measures that have been imposed by former European commissioner Mario Monti who took over as prime minister in November 2011 when Italy appeared to teeter on the brink of bankruptcy. Monti led a technocratic administration that raised taxes, reduced pension payments and made some efforts to liberalize Italy’s labor market and service industries.

Both Berlusconi’s Il Popolo della Libertà and Bersani’s Partito Democratico supported Monti’s government through last year. The former pulled its support in December, citing a collapse in home sales as a result of the new property tax, continued economic stagnation and tepid labor market reforms that were watered down under pressure from the country’s trade unions and the left.

“The situation today is much worse than it was a year ago when I left the government out of a sense of responsibility and a love for my country,” said Berlusconi in early December when his party’s decision to withdraw its support from Monti’s government triggered new elections.

Since, the former premier has touted his willingness to stand up to Germany which many Italians blame for the austerity policies that Monti has enacted. “I was one of the two, three most influential leaders in the European Council,” said Berlusconi in a television interview last month. “I continuously opposed German proposals and demands.”

He also urged the European Central Bank, chaired by the Italian Mario Draghi, to print more money so countries in the south of Europe can finance their deficits in the absence of private-sector funding. The Germans would be extremely apprehensive of such an activist monetary policy for fear of driving up inflation.

If the ultimate consequence of a disagreement over monetary policy is either Germany or Italy leaving the eurozone, Berlusconi said last summer that would “not be the end of the world.”

Opinion polls still give Bersani’s left-wing coalition with the smaller Sinistra Ecologia Libertà the best chance of securing a plurality of the seats in parliament but he would likely need the support of centrist parties that favor Monti’s reelection to secure a majority in the upper chamber. Sinistra Ecologia Libertà did not back Monti’s economic and fiscal reform efforts last year, however, and party leader Nichi Vendola has dismissed the possibility of joining a coalition that includes the incumbent premier as “fantasy politics.”

Monti, for his part, has all but ruled out a coalition with the right as long as it is led by Berlusconi. He told Italian radio last week that he had “no intention of making any agreement with parties that aren’t strongly reformist” but also said that he could “easily imagine a collaboration” with Il Popolo della Libertà if Berlusconi resigned.

If the right does win the election, Berlusconi has said that he will not return as prime minister. Rather Angelino Alfano, who is currently the party’s secretary, is groomed as his successor while Berlusconi could become the economy minister.

Italy’s Left Rules Out Centrist Coalition After Election

Italian left-wing leader Pier Luigi Bersani addresses a Partito Democratico congress in Rome, January 17
Italian left-wing leader Pier Luigi Bersani addresses a Partito Democratico congress in Rome, January 17 (Ilaria Prili)

Italy’s left-wing leader Pier Luigi Bersani on Thursday dismissed the possibility of breaking his alliance with smaller Green and socialist parties in favor of a centrist coalition that includes the supporters of incumbent prime minister Mario Monti’s reelection.

Bersani, whose Partito Democratico is expected to win a plurality of the seats in February’s election, said, “This possibility does not exist,” when asked about sacrificing Sinistra Ecologia Libertà, formerly a coalition of far-left parties, to enter a coalition with Monti’s supporters.

Unlike Bersani’s own party, Sinistra Ecologia Libertà did not support Monti’s economic and fiscal reforms through last year. Partly leader Nichi Vendola has characterized the possibility of joining a government that includes Monti as “fantasy politics.”

The former European commissioner who took over as prime minister from Silvio Berlusconi in November 2011, when Italy appeared to teeter on the brink of sovereign default, told the World Economic Forum in Davos, Switzerland earlier this week: “the most difficult reforms that will have to be undertaken will require broad coalitions.” He later said in a radio interview that he had “no intention of making any agreement with parties that aren’t strongly reformist” but pointed out that Berlusconi’s right-wing Il Popolo della Libertà was resisting anti-graft legislation proposed by his government, implying that he prefers a coalition with the left.

The parties that support Monti get just over 11 percent of the votes in a recent preelection poll whereas Partito Democratico and Sinistra Ecologia Libertà win 32 percent combined. The two may narrowly secure a majority in the lower house of parliament but probably not the Senate where they would need centrist support to pass legislation.

Bersani would then have little choice but to strike a deal with the centrists. Raising the prospect now could convince leftists to switch their vote for the far left, however, denying Partito Democratico the plurality.

Berlusconi’s Il Popolo della Libertà and Lega Nord, the separatist party that supported his previous governments, get almost 17 and 6 percent in the survey, respectively.

Monti’s reform efforts, which included tax increases to balance Italian state spending as well as labor market and pension reforms, were backed by both the main left- and right-wing parties in the country. Berlusconi’s conservatives pulled their support from the technocrat’s administration in December, however, citing a collapse in home sales, economic contraction, the rising tax burden and tepid labor reforms.

Both parties now criticize Monti’s austerity program. Renato Brunetta, the main economics spokesman for the right and a former public administration minister, told Reuters last month that Monti’s budget and economic policies had failed. “Putting our heads down and carrying on like this with a blood, sweat and tears economic policy designed by Angela Merkel,” the German chancellor, “doesn’t help anyone,” he said. Berlusconi has repeatedly touted his willingness to stand up to German demands while he was prime minister.

Stefano Fassina, the main economics spokesman for the left, told the Financial Times earlier this month that he sees no need for further labor market reforms. “It is not difficult for businesses to fire people in Italy,” he said. Partito Democratico previously blocked a government proposal to lift the obligation on the part of businesses to rehire workers who are deemed by court to have been wrongfully discharged.

However, Fassina added that “the structural reform agenda should move on. We want to open up the insurance market, pharmacies, legal services.”

Monti walked back on pharmacy liberalization when the unions balked at a proposal to allow more drugstores. Aspiring pharmacists still have to prove a “tradition” to open one. As a consequence, it’s virtually impossible except for the children of active pharmacists to enter the profession.

Efforts to lift professional restrictions on attorneys have been similarly halfhearted. Minimum tariffs imposed by Berlusconi’s previous government were abolished but in order to compensate lawyers, a maximum was set on the number that can be employed in the industry, making it even harder for law graduates to start a business.

Italy’s judicial system is among the most bloated in the world. It employs some 211.000 lawyers compared to 155.000 in Germany which has twenty million more citizens. Trials take up to 1,000 days on average and can be susceptible to political interference, forcing companies to often settle out of court.

Italy’s Monti Open to Broad Coalition, Left Surges

Italian prime minister Mario Monti in Paris, France, August 3, 2012
Italian prime minister Mario Monti in Paris, France, August 3, 2012 (Elysée)

Italy’s technocrat prime minister Mario Monti said in a radio interview on Friday that he was willing to consider a broad coalition with Silvio Berlusconi’s conservative party, provided the former premier wasn’t part of it. Meanwhile, the left-wing Partito Democratico continued to rise in preelection polls which give it a plurality of the seats in both chambers of parliament.

Monti, a former European commissioner who replaced Berlusconi in November 2011 when the country appeared to teeter on the brink of sovereign default, said he had “no intention of making any agreement with parties that aren’t strongly reformist.” Berlusconi’s lackluster policy response to the European sovereign debt crisis was widely seen a little over a year ago as responsible for threatening to engulf Italy in it.

However, since Monti enacted austerity measures, including spending cuts but mostly tax increases, as well as labor market and pension reforms, many Italians have reconsidered. Berlusconi, who is leading the right-wing Il Popolo della Libertà into next month’s election, has improved his poll numbers by rallying against “German” austerity and the European Central Bank’s unwillingness to finance Italian deficit spending.

On the left, the Euroskeptic Five Star Movement has emerged as a strong contender with a similar massage, although the Partito Democratico‘s rise has sapped it of its previous 20 percent approval, down to 12 percent in a recent poll.

Monti, who enjoys the backing of a coalition of centrist parties in the election, urged Italians to stay the course. If Berlusconi were to resign, “one could easily imagine a collaboration” with Il Popolo della Libertà, he said. The party as well as Partito Democratico supported his government all through last year.

The conservative party’s secretary Angelino Alfano seemed appalled by the statement. “If there is anything that needs to be cleansed from Italy, it is Monti and his caretaker government,” he argued.

Il Popolo della Libertà pulled its support from Monti’s cabinet in December of last year, citing a collapse in home sales, economic contraction, raised taxes and the labor market reforms that were watered down under pressure from the left and its trade union supporters.

The left is nevertheless in the best position to claim the prime ministership and lead the country’s next coalition. A recent Demos survey gave it 35 percent of the seats even in the Senate where it has previously struggled to win a plurality. Berlusconi’s party is at 18 percent and Monti’s supporters at 16. Lega Nord, the secessionist party that backed Berlusconi’s previous governments, gets 6 percent in another poll. Nearly one out of three Italian voters are still undecided. Many of them voted for the conservatives in 2008.