The Bunga-Bunga Party Returns to Italy
In Italy's general election in March, the biggest winner will most likely be Silvio Berlusconi, a former prime minister whose name has long been associated with scandal. More remarkable, Berlusconi's role in forming the next government might actually represent stability in the face of a populist insurgency.
LONDON – Now that Italy’s next general election has been set for March 4, the main contestants are limbering up for a tough eight-week campaign. The outcome is expected to be messy and inconclusive, but one thing already seems clear: the pacesetter may not be the 31- or 42-year-old sprinters heading the two leading parties, but rather an 81-year-old marathon runner.
Yes, as shocking as it is, the kingmaker in this election could be none other than Silvio Berlusconi, the three-time prime minister who popularized the term “bunga-bunga party.” Berlusconi, who last left office ignominiously in 2011, when the euro sovereign-debt crisis threatened to engulf Italy, cannot yet aspire to a fourth term – or to any public office – owing to a tax-fraud conviction in 2013, yet the center-right coalition he leads has the most momentum going into the election.
Italy’s last general election, in February 2013, was also messy and inconclusive. Since then, the country has been governed by coalitions led by the center-left Democratic Party (PD). And now, heading into the campaign, Italy is experiencing its fastest economic growth in more than a decade, though unemployment remains stubbornly high, at more than 11% (and roughly 35% for younger workers). Yet that isn’t helping the PD.
While serving as prime minister from February 2014 to December 2016, Matteo Renzi, the PD’s youthful and charismatic leader, cast himself as a rottamatore (scrapper) who would dismantle the old ways of the political establishment. But he ended up alienating more people than he impressed. His signature achievement was legislation to reform Italy’s sclerotic labor markets – hardly a vote-winner. Since peaking in 2015, with 40% of the vote in European Parliament polls, support for the PD has slipped to only 20-25%, and the party’s left wing has split off.
Today, the leading single party in opinion polls is the insurgent, populist Five Star Movement (M5S), led by the comedian Beppe Grillo (though its official prime ministerial candidate is an inexperienced 31-year-old, Luigi Di Maio). M5S has matured since its founding five years ago, when its central message boiled down to “a plague on all your houses.” It has since moderated its opposition to the euro. And with support at around 26-29%, it remains popular despite its poor performance running the city council of Rome.
The problem for M5S is that, owing to a new electoral law, it will have to win roughly 40% of the total vote to secure a parliamentary majority. Whereas proportional representation will determine two-thirds of seats in the lower house, one-third will be decided by first-past-the-post voting in single-member constituencies, where the M5S will likely lose out, because it is neither willing nor able to form the electoral alliances needed to secure majorities.
In fact, the party grouping that will benefit the most from the current electoral system will be the only one that has managed to forge a pre-election pact with other parties: the Berlusconi-led center right. As he demonstrated with his election victories in 1994, 2001, and 2008, Berlusconi’s greatest strength has always been building coalitions. And, as in those elections, his own party, Forza Italia, will have as its main partner the separatist, anti-immigrant, and Euroskeptic Northern League.
Of course, it will not be all smooth sailing for Berlusconi. He will have to navigate the tricky process of agreeing to joint candidates with the Northern League’s energetic and ambitious leader, Matteo Salvini – who has his own eye on the center-right leadership – and with the group’s third, smaller partner: the right-wing Brothers of Italy.
Still, things are looking good for Berlusconi so far. Forza Italia is polling at around 16%, which is slightly higher than the Northern League’s support, even if it is well below the party’s heyday, when it polled above 25%. And the center right will likely benefit from voter anger over inflows of refugees and migrants, and from the public’s fear of M5S’s disruptive potential. The wind is at their backs.
For his part, Berlusconi has cast himself as an elder statesman – even a safe pair of hands. He has softened his image, by speaking up for pensioners and professing a new interest in animal rights. And, last but not least, he is still a stellar campaigner who happens to own the country’s major commercial TV stations.
Securing an absolute majority would be a tall order for Berlusconi’s group; but it is not impossible. At any rate, a strong showing would be quite a comeback for the old showman – which is precisely what he has always relished. If his center-right coalition wins a majority, he will directly choose the prime minister; more likely, he will be the key player in negotiations over a grand coalition government of center-right and center-left parties.
Most remarkable of all, either scenario would be widely regarded as a stable and respectable outcome, compared to the most likely alternative: a minority government led by M5S. Could Berlusconi end up being Italy’s political savior? Don’t rule it out.
Will Italy Cross the Illiberal Rubicon?
Whatever the outcome of Italy's election, it will have far-reaching implications not just for Italy and the EU, but for the cause of democracy worldwide. Whether or not they realize it, Italy’s voters are about to choose not just among political parties, but also between political regimes.
PARIS – In 1841, the Italian composer Giuseppe Verdi completed his celebrated opera Nabucco. “Va, pensiero,” his famous aria describing the fate of the Hebrews in the desert, would go on to become a rallying cry for Italian patriots fighting for liberation from the Austrian Empire.
Then, in a sesquicentenary performance conducted by Riccardo Muti at the Teatro dell’Opera in Rome in 2011, Nabucco was put in the service of democracy. Silvio Berlusconi, the prime minister at the time, was present in the audience, and he would wake up the next day to headlines in the Italian press such as, “Berlusconi Overthrown by Verdi.” Of course, it would be more accurate to say that Berlusconi, who was forced to resign later that year, overthrew himself, through his displays of personal excess and financial corruption.
With Italy approaching a decisive parliamentary election on March 4, such historical references are useful once again. But whereas Italians were mobilizing against Austria in 1841, today they may be heading toward an “Austrian model” of governance by a coalition of the right and the extreme right. And whereas Berlusconi was falling from grace in 2011, he is now a potential kingmaker. At 81, he incarnates an aging and increasingly cynical Italy. Some voters are returning to him out of conviction; others because they fear the alternatives would be even worse.
At the same time, the election’s outcome has been all but impossible to predict, because the process has become so complex that even the most sophisticated voters are having trouble understanding it. Owing to a new electoral law, around 40% of parliamentary seats will be decided by first-past-the-post voting, with the rest allocated proportionally.
Still, even if most bets are off, one can reasonably assume two things about this election. First, voter abstention will be high, especially among the young. This is not May 1968, when students across Italy took to the streets. Today, young Italians are deserting the ballot box – though one cannot rule out the possibility that they will eventually return to the streets.
Second, the election will leave Italy divided, not just politically and socially, but also geographically. The populist Five Star Movement (M5S) is particularly strong in the south, the far-right Northern League is powerful in the north, and Venetians are increasingly dreaming about autonomy, or even independence.
Fears that Italy could be returning to the time when it was a mere “geographic expression” are probably overstated. Yet Italy could well reclaim the title of “sick man of Europe” in the weeks to come, especially if the election produces no majority and a hung parliament. Russia, for its part, would welcome that outcome, and has probably been doing everything it can to bring it about.
An Austrian-style alliance between Berlusconi’s Forza Italia and Matteo Salvini’s Northern League would also bode ill, because it would put Italy at odds with the rest of the European Union’s founding members.
Similarly, a significant victory for M5S would be undesirable. The impulse to reject the status quo is so strong among Italian voters that they have not been deterred by M5S’s failure to govern properly in Rome, where it captured the mayoralty in June 2016. And yet M5S probably cannot achieve a parliamentary majority, and it has vowed not to enter into coalitions with other parties.
The only positive scenario, then, would be an unlikely – but not impossible – alliance between former Prime Minister Matteo Renzi’s center-left Democratic Party and Forza Italia. A coalition government comprising these two parties, would most likely result in Paolo Gentiloni, the well-regarded current prime minister, remaining in power.
That would probably satisfy France and Germany, as well as the European Commission. The main problem, though, is that Renzi has remained unpopular since he resigned as prime minister following a daring but unsuccessful attempt to enact constitutional reforms through a referendum in December 2016.
Despite Italy’s grim economic, social, and political situation – to say nothing of the growing tensions surrounding migration from Northern Africa – financial markets have been relatively serene. Investors do not seem to fear a M5S victory, nor are they particularly concerned that Italy’s youth unemployment is close to 33%, or that its rate of economic growth is below the EU average. Are investors underestimating the risk that the EU’s third-largest economy could plunge into a downward spiral into polarization and paralysis?
Whatever the outcome of this uncertain election, it will have far-reaching implications not just for Italy and the EU, but for the cause of democracy worldwide. What kind of Italy will we see after March 4? Will it be one that joins with French President Emmanuel Macron in reinforcing the European project, or will it embrace the authoritarian populism now running rampant in Central Europe? Whether or not they realize it,Italy’s voters are about to choose not just among political parties, but also – and more importantly – between political regimes.
Can Movement Politics Renew European Democracy?
One might expect diffuse, grassroots movements that emerge from large-scale street protests to be more inclusive, deliberative, and democratic than traditional political parties. But the proliferation of personality-driven movements on both the right and the left in recent years calls that assumption into question.
PRINCETON – Many people expected the big political story of 2017 to be about the triumph of populism in Europe. But things didn’t turn out that way. Instead, the biggest story was about self-styled “movements” upending or replacing traditional political parties.
Consider French President Emmanuel Macron’s La République En Marche!, which swept the French presidential and parliamentary elections this past spring. Or consider how, at the end of the year, 31-year-old Sebastian Kurz became Chancellor of Austria after refashioning the conservative Austrian People’s Party (ÖVP) into a movement called “The Sebastian Kurz list – The New People’s Party.”
Across the European continent, more voters have come to see traditional political parties as self-interested and power-hungry. In the developing world, too, parties with well-established pedigrees, such as the African National Congress (ANC) in South Africa, are now widely regarded as corrupt. In many cases, traditional parties have become what political scientists call “cartels”: they use state resources to remain in power, and, regardless of their policy differences, they often work together to keep out challengers.
Young voters, in particular, seem to have less interest in working for traditional parties, which they view as overly bureaucratic, and thus boring. One is reminded of Oscar Wilde’s famous quip about the problem with socialism: it takes up too many evenings. Not surprisingly, then, the most innovative political experiments in Europe in recent years have emerged from street protests and mass assemblies that eschewed hierarchical forms of organization.
For example, Spain’s left-wing Podemos was formed after mass demonstrations by the indignados in 2011. Italy’s populist Five Star Movement (M5S), which came out on top in Italy’s 2013 parliamentary elections and is predicted to do well again in 2018, emerged from large rallies organized by comedian Beppe Grillo against “la casta” – his derogatory term for what he sees as the country’s ruling casteof professional politicians and journalists.
Yet something funny happened between these movements’ origins as spontaneous, inclusive street protests and their later success at the ballot box. Ironically, even as they have continued to tout horizontal forms of organization and participatory democracy, their charismatic leaders have concentrated ever more power in their own hands.
Podemos Secretary-General Pablo Iglesias, for instance, has drawn criticism from idealistic activists in the movement for his “hyper-leadership” and “online Leninism.” In response, Iglesias has declared that, “one cannot storm heaven by consensus.”
Grillo holds no official position in M5S, which bills itself as a “non-association,” and yet he owns the blog that has been key to the movement’s success, as well as the copyright to its official symbol. He has revoked M5S members’ right to use that symbol for supposedly breaking the “rules” – or what is officially called the “non-statute” – of his “anti-party.” And those running for public office under the M5S banner must sign a contract promising to pay fines if they violate party principles.
Of course, political movements are not necessarily populist in nature. As the Green and feminist movements have shown, a movement can contest traditional forms of politics without claiming to represent “the real people” or the “silent majority.”
But today’s political movements also tend to be less pluralistic than the large parties that have dominated post-war European politics. This makes sense, given that “movement” implies not just dynamism, but also a presumption that all members are in complete agreement about the path forward.
The problem is that when everyone supposedly already agrees on where they are going, there seems to be no need for extensive democratic deliberation. Thus, the movements that have emerged in Europe in recent years – on both the left and the right – have focused on strengthening their respective individual leaders, rather than empowering their rank-and-file members, even when they emphasize participatory democracy.
In the case of Macron and Kurz, each leader has tapped into the sense of dynamism and purpose that is usually a key feature of single-issue movement politics. Kurz, for his part, has bent the entire ÖVP to his will. In addition to giving it a new name, he has reorganized its internal structures and changed its official color from black to turquoise. Still, the party’s conservative platform has hardly changed at all, suggesting that Kurz’s moves are about marketing and asserting his personal authority more than anything else.
In the end, Podemos, La République En Marche!, and Momentum, the youth movement that helped Jeremy Corbyn reshape the British Labour Party’s platform, are not important because they are movements per se. Rather, they are important because they provide more political choices for citizens, especially those frustrated with prevailing duopolies – political systems dominated by two long-established parties offering nearly identical policy prescriptions.
In Corbyn’s case, movement politics could reestablish Labour’s progressive credentials, and reverse what many saw as an embrace of neoliberal policies under former Prime Minister Tony Blair. But it would be naive to think that movements alone will make European politics more democratic. If anything, they could operate even less democratically than traditional parties, owing to their strong plebiscitary forms of leadership.
The Electoral Fate of Italy’s Banks
To fix Italy's banking system, the government that emerges from the general election in March will need a solid majority, a comprehensive strategy to boost economic growth, and a willingness to confront vested interests. But none of the parties has shown any indication that it can meet any of these criteria, much less all three.
LONDON – As Italy approaches what promises to be one of its most contentious general elections since 1945, banks are the elephant in the room. Too big and cumbersome to be ignored, they are a constant source of embarrassment for the parties that have been in government since the global financial crisis of 2008, especially for former Prime Minister Matteo Renzi, who hopes to rekindle his political career in March. They are also an inviting anti-establishment target for the populists of the Five Star Movement.
Indeed, Italy’s banks epitomize all the problems that the financial crisis brought to the country, and on which the populists are capitalizing: a double-dip recession followed by sluggish GDP growth, high unemployment, especially among the young, and a collapse of domestic demand. Banks also embody the tangle of vested interests, malpractice, and even corruption that, together with la dolce vita, have come to be associated with Italy.
Despite the bail-in of four local banks, the bailout of Monte dei Paschi (one of Italy’s systemically important banks), the liquidation of two regional banks, and the market-led rescue of the mid-size banking group Carige – all within two years – the banking system has yet to be stabilized. Will the underlying economic recovery – this year and next, the Italian economy should grow in real terms by 1% – assist Italy’s banking sector by keeping a lid on a stock of non-performing loans (NPLs) totaling nearly €180 billion ($220.9 billion)? Or should the recovery be used to clean up wobbly banks’ balance sheets, by bundling their NPLs and selling them at a discount?
Before the global financial crisis, Italy was described as a country of solid banks that were rooted in the local economy and never played with exotic financial instruments such as derivatives. It was also said to be a country of prudent savers, who buttressed the profligate public sector and its expanding debt.
In the aftermath of the collapse of Lehman Brothers in September 2008, Italy’s then-finance minister Giulio Tremonti famously endorsed the health of the country’s banking system. As a result, a major recapitalization of Italian banks and the creation of a “bad bank” to absorb NPLs were deemed unnecessary.
Ten years later, Italy is no longer that imagined land of prosperous banks and happy savers. The prolonged recession and economic malaise have dented the individual savings rate, while banks no longer have the resources to provide peace of mind to many retail investors, whose trust has been severely eroded.
The implicit pact between banks and savers was broken in late 2015, when four troubled local banks were bailed in and the shareholders took the hit. For years, this pact had underpinned Italian-style financial repression, whereby risk-adverse savers traded safety, implicitly assuming that banks could not fail, and accepted relatively low real returns. The political backlash that ensued from the bail-in triggered a blame game between the government and the opposition parties, and even between politicians and regulators, with all blaming the European Union and its banking regulations.
The government that emerges on March 4 will have to make the banking sector a high priority. In order to restore confidence among savers and investors, it will have to find a solution to clear banks’ balance sheets of NPLs, which are undermining credit, making capital more expensive, and thus acting as a drag on the economy.
The solution must be market-led, as the volume of NPLs is far too big, and the recovery far too slow, for this debt to be gradually absorbed. The new government thus may need to identify cases where NPLs hinder banks’ normal functioning, sell this debt, and prop up the capital of the affected banks. At the same time, civil bankruptcy procedures will need to be reformed, to ensure the reasonably fast action on defaulted borrowers’ assets.
If confidence and credibility are to be restored, sound governance has to be put at the core of the next government’s plans for banks. Over the years, regulatory lapses, lack of board independence, and a good dose of financial repression turned many banks into channels to fund family members, friends, and political associates.
Monte dei Paschi, for example, was long associated with the center-left Democratic Party, which has been in government since 2013. This political association may have prolonged the bank’s saga for several years, until it had become so battered by inconsistent piecemeal interventions that a market solution became impossible. Following last year’s bailout, Italy’s Treasury owns about 70% of the bank.
Restoring market credibility also means clarifying banks’ role in the economy. If they provide a public good – that is, credit to the real economy – should they be part of a broad-based long-term economic policy strategy for the country? And, in an economy with approximately 600 small independent banks and too many branches, should consolidation be encouraged and supported?
Any effort to put Italy’s banking sector on a sounder footing will require a stable majority government, consistent determination to put economic growth at the center of the political agenda, and willingness to confront Italy’s many vested interests. Unfortunately, none of the parties has so far come out with a comprehensive, credible economic agenda. And none so far seems capable of winning or delivering a parliamentary majority.
The most likely scenario, then, is that Italy’s zombified banks will continue to feed the populist electoral narrative. And if that narrative fuels a populist victory in March, reform of the banking sector will again be postponed, raising the eventual cost still further.