June 2018. Crossing the Rubicon.

Crossing the Rubicon

Thinking the dust had finally settled from Italy’s election, people have been startled to find that it’s settled in exactly the same place. Having taken the brush for a dose of political spring-cleaning this is something of a disappointment. Italy doesn’t seem to have had a proper government in living memory. Roughly, the country now seems to have ended up like a panini. Salvini’s ‘Lega’ in the north, Di Maio’s 5 Star Movement in the south, and a severely squashed Renzi’s PD in the middle. Needless to say, the latter has done a runner, leaving the left without even a duster. President Mattarella, ‘po-faced’ at the set back to his preferred leftist option, stopped his cavilling, and demanded someone – anyone – form a government. He was just looking for an excuse to bring back one Moriarti Monti, ensconced in the Senate, to broker another disaster with a ‘technical government’. After all, no one’s more competent at such things, except his old pal Draghi. Significantly, neither managed to develop the magic Goldman Sachs sleight of hand while they were there. Anyway, the quite nefarious ECB President has his hands full managing a bit of Quantitative Easing, now he’s no longer purchasing those debt-laden Italian junk bonds. I wonder where he keeps them, or where poor Italy’s going to get a miserable pfennig for a crust of bread? Draghi, being a fully paid up member of the whinging European smart-set, knows that if he’s given a green card there’s a chance that Merkel’s new snitch, Mini Macron may find a job for him in the French ‘wunder’ state he’s busily creating. With that pompous authority little people sometimes show, he’s let it be known that Italy should shut up and do as it’s told! His words were echoed by a specious Mr Weber from the German EPP, who’s got himself in a panic over an EU crisis, high lighting the Italian debt they’d helped to create. The debt of course is not what’s worrying him; despite escaping the Euro would be a breath of fresh air for Italy, allowing a return to the lira and the devaluation of its currency. No, the latter mechanism signals his real problem, bringing about an incipient collapse of the EU, and the economic writing on the wall for Germany. That’ll take the froth off their Cappuccinos. Lest you forget, devaluation is the time honoured method governments use to remove a balance of payments deficit, a mechanism Italy cannot use whilst tied to the Euro, but could, if it returns to the lira. It thus would make its exports cheaper, and conversely, imports dearer, completely undermining Germany’s contrived market advantage. If it were a success, as it likely would be, how many EU countries do you think would make a scramble for the door? I hope Mr Weber’s not holding his breath. The ECB’s running out of options, and only a scratch away from a ‘Bail In’, but even that won’t be enough if the national banks gang up on him. They can only shore up the shaky foundations they’ve created for so long. In the meantime, perhaps a little bit of belt tightening in the EU would not go amiss. Those toothless EU parliament members managed to rack up c.40 million euros in expenses last year, besides their gold plated salaries. Talking seems to be their only attribute, as they can’t propose or dispose of anything. Nice if you can get it, but that’s a lot of money for a lot of wind.

We’re told Italy has the possibility of its first ‘right wing government’ since the Second World War. Something of a misnomer you might think, as Mussolini was a Marxist turned Socialist. It has long been a truism, articulated just now by the off/on leftist PM in waiting, a law professor Giuseppe Conte, that ‘left’ and ‘right’ are no longer political expressions applicable in the modern world. It’s surprising how easily history had long been distorted to suit a new agenda. Mattarella doesn’t like the cut of Conte’s suit, because not all on the left are EU friendly. ‘He’s not an elected member, or the choice of parliament’, you’ll hear him carp. But then, ditto Monti, and he was seemingly, disliked by everyone. Neither, for that matter, was Mattarella a choice of the people, being elected by an electoral college stuffed full of old lags. Getting desperate, seeing Italy making a beeline for the Rubicon, he decided to throw a spanner in the works. It appears that he just couldn’t face the fact that a new government would be very different from the Euro sycophantic one it will replace. His phoney excuse of ‘not putting the people at risk’ saw him reject the coalition choice for economics minister, Eurosceptic parliamentarian, Paolo Savona. As the country’s been hopelessly at risk for decades, why does Matterella consider ‘old’ Savona hasn’t got the answer to Italy’s problems? Patently the President is one of the problems, as the replacement, Giovanni Tria, is reportedly more euro sceptic than Savona. Meanwhile the crushed PD cheered. It might mean they can have another crack at the title. More likely, another bloody nose. It’s worth noting that the Queen of England, who is the Head of State and of Parliament, would never dispute the Prime Minister’s choice of Ministers, the prerogative which is theirs, not the Queens. The Prime Minister, in turn, is the de facto choice of the people. Italians, having tied themselves to an American style constitutional system have only themselves to blame.

So, at one point, it seemed to be back to square one and another round of elections, except the caretaker choice of Mattarella won’t get the nod from anyone except, perhaps, the Uriah Heep’s of the PD. The thought of that was enough to kick-start the political Moto Guzzi and put the show back on the road again. The Lega and 5 Star kept their heads together, knowing that with last years crushing debt of 131% of GDP, the result of almost two decades of bad management, and over 30% of its young people out of work, no one could blame the citizens for looking round for a scapegoat. They need to sweep the nation clean. A political Mrs Mop! Despite the doomsayers, the majority of Italians escaped once again from having to make a choice. Like Julius Caesar, having reached the banks of the Rubicon, they have been stopped to study the swirling water with a leery eye. This is their point of no return. The EU is not working for them, as it isn’t for any of the countries south of the Apennines, or East of the Pyrenees. What you see on the surface is not always what’s under the ground, and Italy you’ll remember, lies on a seismic fault. As far as one can see, on a political one as well! Matarella could do no better than remind himself of an incidence in Italy’s history, when Sicily was just a little more Greek than now:

At Girgenti on the African Sea the people, bent under the tyrannical reign of Thrasydaeus, threw off his yolk and elected Empedocles who established a democratic government run by the people and who helped raise the town to its greatest eminence through political equality. One of his greatest attributes was an ability to listen to his people, and judge their moods before making a decision, believing they were his soundest advisers.

Now there’s an idea the Sicilian Materella should consider. Perhaps he did. At least he blinked, and everything was back on the table again. Perhaps the threat of impeachment had some real teeth no one thought about. Certainly not the British press. The European Union dupes might shout the louder, but it wasn’t loud enough to reach the Italian soul.

Unhappily, the world is littered with Siren voices. Why Southern Ireland, with a debt of c.100% of GDP, wants to stay tied to the EU is something of a mystery, even if you allow for the parasitic indulgences it has been allowed to wallow in. It is not just the previous alleged corruption scandals of Presidents Tusk and Juncker that addle the foundations of this disastrous political and economic venture; it’s because it’s an entirely artificial concept. The temperament and character of a southern people will not blend into the dour, obsessions of their northern neighbours. You cannot drive a square peg into a round hole. This is a philosophical, economic, and physiological miss-match that will end in disaster. One can do no better than remember that throughout history nations have not been made by the scratch of a Dupont fountain pen, but by a great deal of blood, sweat and tears!

Looking closer to home, it’s true that coalition governments are rarely successful, as they have to water down their programmes, and disappoint their supporters. It leaves a bad taste in the mouths of the electorate. At the moment, such is the situation in Italy. Possibly ‘Lega’ and ‘5 Star’ have more in common than most in that their dislike of monetary union is based on a firm foundation, physically demonstrated by its disastrous economic result to their country. It is indicative of the currencies inherent weakness. Salvini might well abhor the EU, but softly softly must surely be his party’s maxim for the moment. Rome, as they say, wasn’t built in a day. He needs the quirkish Di Maio to give him the numbers, even if he’s wet at dumping the Euro while irked at the c.four billion euro short fall in the balance of its finances by being a member of the EU. The EU, he fumes, expects the Italian citizens to go on paying their subscription to the club while racking up a debt by importing more than exporting to the EU. It’s how you break a country, didn’t you know. The EU’s not going to tell the man-in-the-street that there’s more at stake than spanking good holiday’s abroad, or a new car when they get tired of the colour. Salvini needs to watch his back as there’s also the elephant in the room, one Silvio Berlusconi, just waiting by the door having had his suspension lifted by the judiciary, and can now run for the top job. He’s petulantly full of angst at being left out, and will probably try to give Lega and 5 Star enough rope to hang themselves. With his undoubted experience he might have been a tangible asset, but one can’t help feeling that he’s past his sell by date. Frankly, there’s no likely heir apparent for Forza Italia to go it alone when the time comes. If it ever will, the way the world’s going. Still, Italy’s got a chance to get it right, and that may stand for something, providing the necessary glue to the new government’s ambitions. The flat rate tax of 15%, and popular pension reform all fit in with a rejuvenating policy, and though it might be throwing fiscal rules out of the window, the narrow views of economic journalists neglect to mention the balancing benefits of a sales bonanza to the exchequer. If you’ve got more, you spend more. With a real disposable income per capita that has never returned to the lire level of 1995, something drastic needed to be done. I remember Renzi being quoted as saying “Growth is my dream, and my nightmare.” Apparently he was too dim to realize a prisoner, caged behind bars, can only dream of freedom. New legislation that will enable the government to kick out EU laws will not go amiss. On the other hand, a universal minimum income seems to be untenable without government aid, and may, perhaps even should, fall by the wayside.

But populism, not pragmatism, is the political mood of the moment, and may pave the way for momentous change. While Britain dithers over Brexit, Italy has politicians with a much more positive outlook who believe they know where they’re going, even if the direction remains a mystery to the EU, and perhaps even themselves. The only dark cloud is the emergence of a cyclical world depression that appears overdue despite the vaunted, but lack lustre, economic performance of other countries. A resurgent industrial Italy could still be nipped in the bud, especially with the help of Mattarella. It does badly need to devalue its currency, but even if that were possible, a world economic downturn could all but negate its utility. ‘Italy First’ Salvini says, but he’s got some way to go when five thousand people apply for five nurses’ jobs. The new government will certainly have its work cut out in such a negative economic environment.

Strangely, Tuscany along with Emilia Romana and little Alto-Adige, are the only left leaning regions in Italy, and yet Tuscany leads the way in demonstrating how even non-industrial regions can buck the trend. For the moment, despite economic pessimism, Tuscany, on a wave of regional optimism, has created a good foundation for survival by promoting itself to itself, lauding the products it produces in direct opposition to the external market. ‘Made in Tuscany’ is ‘Made in Italy’, after all. Before we know where we are we’ll be back to the city-states. Small being beautiful, but probably only in the mediaeval sense! Perhaps Conte was right, given all this private enterprise, that ‘left’ and ‘right’ are no longer a political expression. That won’t go down well in socialist single market Brussels, while doing wonders at home. However, to get the whole nation back on course other similar regions, especially the south, will have to follow suit and create the dynamics of self-rejuvenation if they’re going to keep Italy from the wolves. I don’t recommend you hold your breath either, especially if Italy when the time comes crosses the Rubicon.

Postscript: Mamma Mia! It looks like they did!

 (The Rubicon, no more than a stream, lies to the south of Ravenna, and in Caesar’s time was the Roman provincial border with Cisalpine Gaul. To cross it a General had first to disband his army. To refuse was a capital offence. In 49BC Julius Caesar decided to cross the Rubicon with his army, setting the scene for the Civil War and Rome’s greatest period under his adopted son and heir, Augustus.)