Italy’s dying elite is dragging the Eurozone ever closer towards the abyss

Venice—The great German novelist Thomas Mann once rightly described this bejewelled city as one of ‘flattering and suspect beauty, half fairy tale and half tourist trap’. The same can be said for the country of Italy as a whole, where things are rarely as they seem.

For the problem with political soap operas is when they become suddenly deadly serious, as is presently happening in a country where political schisms are as common as great food and peerless scenery. The wounded ruling Democratic Party (PD) has split, with the rebels forming a new party called (confusingly enough) the DP, The Progressive and Democratic Movement.

It seems as if we are all trapped in the unbeatable scene from the great Monty Python movie, Life of Brian, where the Pythons sketch out in hilarious detail the infinitesimal differences that have led the anti-Roman movement to splinter into a thousand pieces.

Yet lurking just beneath the obvious hilarity of the endless splits in the Italian left—founded at least as much on personal jealousies and vendettas as real political disagreements—something terribly serious is going on here. As this column predicted, the defeat of former Prime Minister (and present beleaguered head of the PD) Matteo Renzi leaves Italy just two moves away from bolting from the euro-zone, dooming the whole flawed project to its final reckoning.

If the radical populist Five Star movement of comedian Beppe Grillo were to win the next election (which must be called by February 2018 at the latest), that arch euro-sceptic has vowed to call a referendum on euro-membership itself. Present opinion polls place such a pivotal vote as too close to call.

Formerly staunch euro-federalists, Italians have grown ever more sceptical as their economy has moved backwards since the Lehman crisis of 2008. In February 2017, the European Commission warned Rome it must reduce its Everest-like debt mountain of 133% of GDP. Presently, youth unemployment hovers at 36%, a Depression-era level by any measure. Worse, Germany (and its EU henchmen) are seen increasingly by Italians as the villain of the piece, forcing the country into endless rounds of austerity without delivering the economic growth which is the only thing to make such a sacrifice politically palatable.

With Renzi’s PD split, an Ipsos poll of February 2017 had the Five Star movement pull into the lead for the first time, with 30.9% of the projected coming vote. The PD was down to 30.1%, with Silvio Berlusconi’s discredited Forza Italia movement at 13%, and the rising populist, anti-immigrant Northern League on 12.8%. As the PD is all that is left of the Italian political elite, its recent schism makes the odds on Five Star coming to power more and more favourable.

And there is no one waiting in the wings to save the Italian elite from itself. Renzi was discredited by his December 2016 overwhelming referendum defeat over electoral reform. Berlusconi was discredited by his many wasted years in power, where Italy failed to undertake the desperately needed structural reforms to make its economy fit for purpose in the post-Great Recession era. Both the established left and the right in Italy have taken to falling apart internally, making their failures seem both comical and contemptible.

It is as if we are in a late scene in Lampedusa’s grand, tragic masterpiece, The Leopard, where Don Fabrizio, the Prince of Salina, entirely comprehends both that his world is falling apart, and that he will do absolutely nothing to stop it. Last week, in a dinner with influential Italian friends of 20 years, the ghost of Don Fabrizio was explicitly conjured up, in order to explain to me what is presently going on in Italian politics.

For my wise and kind hosts were explaining that the Italian established order as it has been known here is dying, and more importantly why no one is doing much of anything to halt this slide into the abyss. But there are bigger beasts about to be slain here. For Italy–unlike its equally ailing fellow euro-zone member Greece—is simply too big to fail. Neither Brussels nor Berlin can hope to bail it out. As such, the coming populist rejection of the euro by Italy would definitively spell the currency’s end in its present form.

The organic political scene in Italy suits its nature, part comic, part tragic, and very human. However, this time the consequences of Italian political failure could well prove incalculable for Europe as a whole.

Published in City AM London, March 6, 2017.