June 23, 2017

Letter From Paris: Like UK’s Cameron, Italian PM Matteo Renzi Gambles His Future on a Referendum … and Loses

Nicole Prévost Logan

On Dec. 4, 2016, 60 percent of Italians responded “No” to the referendum question on constitutional reforms posed by Prime Minister Matteo Renzi. His aim was to modify the electoral laws, thus reducing the role of both the Senate and regions, and thereby enhancing his own power. This was a dangerous attempt at undoing the safeguards built into the 1948 constitution and intended to erase all traces of Mussolini’s fascist regime.

To better understand Renzi’s action, one should remember the omnipresent Italian dislike for a strong, centralized government. It was only in 1871 that the Risorgimento (meaning ‘rising again’) led to the unification of the country with Rome as its capital.

Beppe Grillo – the comedian turned populist – was quick to seize the opportunity and had his “Five Stars” party join the coalition opposing the referendum .

After the long “reign” of Silvio Berlusconi, who stepped down as prime minister in his 80s and the two-year-government of Mario Prodi, aged 70 and a long-time European Union (EU) economic commissioner, the Italian population must have found the arrival of 41-year-old former mayor of Florence as quite refreshing. Pleasant, laughing a lot and described as, “a young man in a hurry,” by a French diplomat, Renzi got along well with all the world leaders (too much so for my taste as he became close to President Erdogan of Turkey and supported that country’s accession into Europe.)

Former Italian Prime Minister Matteo Renzi.  (Photo from Press-TV.)

Renzi’s resignation may trigger political instability given the state of financial crisis in the country. Italy is one of EU’s founding members and its third largest economy, but the Italian economy is lethargic and in a state of stagnation. The public debt is 120 percent of the Gross Domestic Product, well above the level of 60 percent allowed by Brussels. In fact, Italy is called the mauvais elève (flunking student) of Europe.

After the Greek debt crisis, a number of financial mechanisms have been put in place in Brussels under the respective leaderships of Germany and France. They include a Banking Union to assure the safety of the private sector and more stringent requirements imposed on the banks under the “single rule” book.

Mario Draghi, head of the European Central Bank (ECB), supervises the 6,000 main European banks. In order to boost the growth of Europe, the ECB has been pouring 80 billion Euros per month into the monetary market, buying back poor quality obligations. Renzi has often been in disagreement with these new rules and refused to be tied by institutional constraints, particularly when they come from Brussels.

The specific problem with Italy is that its banks are undercapitalized and hold about 360 billion of “toxic” loans comparable to the US sub-primes in 2007-08. Several of the largest banks are on the verge of collapse. The Banca Monte dei Paschi di Siena (BMPS) – the oldest bank in the world, founded before Christopher Columbus – is in the worst shape and on Dec. 9, the ECB forbade Renzi to ask his government for a 20-day-prolongation of a four billion Euro financial assistance package.

Renzi’s relations with Brussels have been tense and he frequently refused to go along with its policies, blocking negotiations. For instance on Nov. 11, he did not agree with the decision made by the other EU members to protect themselves from cheap imports from China.

He also deemed insufficient the funds granted Italy to cope with the flow of refugees. (that request was justified though, since 500,000 refugees have entered the country in the past two years, and 171,000 since the beginning of 2016.) He was criticized by the other EU members for “sabotaging” the Brastislava talks last September about the European response to Brexit.

Referenda can be dangerous, particularly when the initiator bets his or her future on them.  In the case of Italy, however, it might have been a good thing. The departure of Renzi will likely bring more cohesion in the EU to face the many problems ahead.

Editor’s Note: This is the opinion of Nicole Prévost Logan.

Nicole LoganAbout the author: Nicole Prévost Logan divides her time between Essex and Paris, spending summers in the former and winters in the latter. She writes a regular column for us from her Paris home where her topics will include politics, economy, social unrest — mostly in France — but also in other European countries. She also covers a variety of art exhibits and the performing arts in Europe. Logan is the author of ‘Forever on the Road: A Franco-American Family’s Thirty Years in the Foreign Service,’ an autobiography of her life as the wife of an overseas diplomat, who lived in 10 foreign countries on three continents. Her experiences during her foreign service life included being in Lebanon when civil war erupted, excavating a medieval city in Moscow and spending a week under house arrest in Guinea.

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