The Italian Job


Italian Prime Minister-designate Giuseppe Conte (R) addresses the media to announce his list of ministers after a meeting with Italian President Sergio Mattarella at the Quirinale Palace in Rome, May 31, 2018. 

The Italian Job

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After the country’s two populist parties agreed to form a government with law professor Giuseppe Conte as the new Italian prime minister, a position he’d stepped down from just a few days before after his pick for economy minister was nixed by President Sergio Mattarella.

Former IMF official Carlo Cottarelli gave back his mandate on May 31, only 72 hours after being given the power to form a government that would blunt the anti-EU impulses of the leaders of Italy’s two anti-establishment parties, Luigi Di Maio, of the leftist populist 5-Star Movement and his far-right, ultranationalist counterpart, Matteo Salvini.

Mattarella gave Conte a second chance after a compromise was forced on 5-Star and Lega by intense market pressure on Di Maio and Salvini, who were left with no other alternative but to compromise on the appointment of a government that wont’ declare war on the Eurozone and the European Union itself. While the markets have calmed with the news that Italy has come back from the brink of an even more protracted political crisis, the new Conte-led government still needs to win a confidence vote in the parliament, which is more than likely just a formality at this point.

A far deeper catastrophe may have been avoided for the whole of the Eurozone, but the rise of such a openly antagonistic government in one of the EU’s lynchpin nations couldn’t have come at a worse time for Brussels.

Still reeling from the UK’s Brexit vote just over two years ago, the European Union was hoping that the tide of populism and nationalism that seemed to be building to a crescendo following Britain’s decision to withdraw from the bloc and the election of an isolationist Donald J. Trump administration in the US had been halted with a string of victories in 2017 that culminated in the election of the self-described ‘radical centrist’ Emmanuel Macron as France’s staunchly pro-EU president.

But with the stunning rise of Italy’s left-wing and far right populists and the sudden collapse of the fiscally conservative Mariano Rajoy government in Spain only a day later has Brussels back on its heels again.

All of this comes at a time when Trump has decided to punish his European allies, and key trading partners, with stiff tariffs that have deeply strained the Euro-Atlantic alliance and could lead to a trade war. Brussels has also been unable to halt the crackdown on democracy in countries like Hungary and Poland – who openly emulate Russian President Vladimir Putin’s vertical of power – or to find an heir to a much diminished Angela Merkel, whose current term as German chancellor could see her marginalised by the forces of the radical right and left across the continent.

Carlo Cottarelli had been tapped to serve as prime minister by President Sergio Mattarella after the latter vetoed the 5-Star/Lega alliance’s choice of an anti-Eurozone candidate to serve in the incoming cabinet, the Quirinal Palace in Rome, May 28, 2018. EPA-EFE/QUIRINALE PALACE/FRANCESCO AMMENDOLA

Carlo Cottarelli had been tapped to serve as prime minister by President Sergio Mattarella after the latter vetoed the 5-Star/Lega alliance’s choice of an anti-Eurozone candidate to serve in the incoming cabinet, the Quirinal Palace in Rome, May 28, 2018. EPA-EFE/QUIRINALE PALACE/FRANCESCO AMMENDOLA

It is important to look back at the last several extraordinary weeks in Italy to understand how both Rome and the EU as a whole arrived in the situation that they currently find themselves trying to navigate through.

The drawn-out process of sitting a new government that has gripped Italy since voters first went to the polls in early March took an unexpected twist over a 24 hour period that saw Mattarella veto the controversial nomination of the firebrand anti-Eurozone populist, Paolo Savona, as economy minister infuriated the Eurosceptic political alliance that was holding onto a thread to keep its yet-to-be-seated coalition in place.

Mattarella’s rejection of Savona and his decision to tap a traditional technocrat like Cottarelli as a stop-gap set off a political firestorm and signalled that Italy’s pro-European Union politicians were ready to openly challenge the radical agendas of Di Maio and Salvini.

An announcement by Mattarella late on May 27 said that he would exercise his rarely-used veto power to block the 5-Star/Lega alliance from forming a government because the choice of Savona would carry massive financial risks for the country as Savona’s anti-European speeches had already triggered higher risk premiums on sovereign bonds and led to a decline on the global financial markets, while also severely damaging Italy’s already bruised reputation following months of fruitless public spats and horse-trading between the victorious, but rival, populist parties over who would lead the next government.

Though the role of an Italian president is largely ceremonial, the office does have certain key powers that grant the president the right to block the appointment of a cabinet member. The veto has only been used on three previous occasions since the end of the Second World War, most recently in 1994 when then-President Oscar Luigi Scalfaro blocked multiple attempts by former Prime Minister Silvio Berlusconi to appoint his personal lawyer, Cesare Previti, as justice minister.

Savona had gained a reputation for his outspoken hostility to austerity programmes and hardline criticism of the EU. In his latest book, Savona dubbed the single currency “a German cage” and state that “we (Italians) need to prepare a plan B to get out of the euro, if necessary … the other alternative is to end up like Greece.” Savona has been known to attack Italian officials (including Mattarella and European Central Bank President Mario Draghi) for taking Italy into the euro just over 18 years ago, which he claims has “halved Italians’ purchasing power”.

Immediately after Savona was announced as the man charged with guiding Italy’s economic policy in the new government, widespread panic spread from Rome to Brussels as fears mounted that the 5-Star/Lega coalition would be unable to deliver on Italy’s commitments to the European Union and its ability to rein in the country’s immense national debt, which is equal to 1.3 times its annual output.

In an act of desperation, Mattarella attempted to hand over the government of Italy (Europe’s third-largest economy) to an individual who was widely regarded as a steady hand by those in Rome and Brussels who feared the 5-Star/Lega alliance’s preference for an administration of radical outsiders that may lead to near-instantaneous moves to withdraw Italy from the Eurozone, NATO, and the EU.

Earning the nickname “Mr Scissors” while at the IMF, Cottarelli had earned a reputation for making massive cuts to Italy’s notoriously bloated public spending – a characteristic that will not be well-received by either 5-Star or Lega, both of whom have promised to unleash a state-sponsored spending splurge that would radically increase Italy’s already massive debt.

What appeared to be Cottarelli’s sudden road to the premiership came after a whirlwind of events on May 27-28 that saw Conte, the unknown political novice proposed by 5-Star and Lega, walk out of meetings with Mattarella at the Quirinale, the Italian Presidential Palace, having tendered his immediate resignation as prime minister after the two clashed over the appointment of Savona as finance minister.

“I asked for… an authoritative person from the parliamentary majority who is consistent with the government programme… who isn’t seen as a supporter of a line that could probably, or even inevitably, provoke Italy’s exit from the euro,” said Mattarella.

Conte reportedly refused to discuss an alternative to Savona and angrily surrendered his mandate to be prime minister, which he had only held for six days.

Shortly after Cottarelli’s appointment, German Chancellor Merkel weighed in on Cottarelli’s appointment, saying the announcement was “hardly conducive to the markets” and hinted that Italy could be looking at a similar scenario that played out in Greece earlier this decade if Rome continues to derail itself by deviating from the EU’s track.

Asked whether she was concerned about the latest developments, Merkel said, “When there were elections in Greece and Alexis Tsipras (from the Eurosceptic, radical leftist SYRIZA party) was chosen as prime minister, there were many questions to be answered. The two of us spoke with each other the course of many, many nights, and, together, we achieved something. We will have to do the same with Italy since is a key member of the EU.”

Conte’s abrupt resignation and the appointment of Cottarelli provoked outrage from both 5-Star and Lega, with the former’s Di Maio claiming Mattarella had violated Italy’s democratic norms, despite having the constitutional authority to do so.

“We were a few steps away from forming a government, and we were stopped because in our cabinet there was a minister who criticised the EU…I want this institutional crisis to be taken to the parliament and the president tried,” and exasperated and emotional Di Maio told Italian national broadcaster RAI.

Di Maio claimed at the time that Mattarella could be charged under Article 90 of the Italian Constitution that allows parliamentarians to vote on whether the president committed “high treason”.

The reality of the matter, however, was that Cottarelli’s time as prime minister would likely have been brief as a new round of elections aimed at ending the months-long political deadlock were expected once the traditional August holidays came to an end.

He faced the unenviable prospect of trying to form a caretaker government and selecting a cabinet that would help in getting him confirmed as prime minister – which was always unlikely given that the openly hostile Italian Parliament is dominated by 5-Star and Lega – whose popularity has only strengthened since the March elections.

Likely sensing his fate, Cottarelli confirmed on May 28 that fresh elections would be scheduled for the autumn if, as expected, his choices to serve in a new government failed to win a confidence vote.

His announcement appears to have triggered the sudden recalibration by Salvini and Di Maio to push Savona down the list of appointments, but keep the largely inconsequential Conte in his previously announced post as prime minister. Mattarella seems to have concluded that a reshuffled Conte government, with Savona no longer in the conversation, is a more preferable option to a weakened caretaker government that could have resulted in further market volatility and even greater damage to Italy’s standing within the EU and on the international stage.

But what this latest grand act of commedia dell’arte has laid bare is the simple fact that Italy is locked in a deeply divisive ideological donnybrook, one that could eventually turn into a vote of confidence for the EU project, itself, if the new government in Rome fails present a clear path to the voting public how it plans to wade through the multitude of crises that it faces and how the 5-Star/Lega alliance plans to manage its relationship with Brussels.

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