Robert Harneis –TDO- (FRANCE) -Italy has now been without a government for 84 days, a record for the post war Italian Republic.
In a highly controversial move Italian President Sergio Matarella has vetoed the new Conte government’s choice of the distinguished economist Paolo Savona as Finance Minister because he is hostile to the Euro. He has nominated a caretaker government under Carlo Cotarelli, a senior official from the International Monetary Fund, with elections planned in the autumn or the beginning of 2019. Cotarelli, has never been a minister and may not be successful in forming a government. In any event battle is now joined between those that want to see radical changes in the Eurozone and the defenders of the status quo backed by Brussels and Germany.
The 76-year-old Matarella has broken the convention that the neutral President accepts the nominations of an incoming Prime Minister, unless the candidate is a convicted criminal or there is a blatant conflict of interest. One of the founders of the post war Italian constitution, Constantino Mortati, wrote in 1952 “the Head of State is obliged to accept Ministers proposed by the Prime Minister designate.”[i]
Matarella justified his intervention, saying that he asked for “an authoritative political figure from the coalition parties who was not seen as the supporter of a line that could provoke Italy’s exit from the euro as Finance Minister”. He added “The uncertainty over our position within the euro has alarmed Italian and foreign investors who have invested in securities and companies”. In taking this position he will inevitably be seen to be aligning himself with the President of the European Commission Jean-Claude Junker who notoriously commented on the Greek elections in 2015 “there can be no democratic choice against the European treaties”. But he is also backing domestic savers and foreign investors who would lose by Italy devaluing and leaving the Euro, putting them ahead of the interests of Italy’s less well-off and unemployed. Speaking on television, he summed up commenting that he was saying “no to someone who is in favor of leaving the Euro. It is about respect for peoples’ savings”.
The rejected 81-year-old Savona is certainly “authoritative” and has worked at the highest levels for the Bank of Italy. He was at various times a Minister and adviser to Presidents. He is a university Professor and a monetary expert. His ‘crime’ is that he makes no secret of the fact that he is strongly opposed to the European Union as currently organized and the Euro in particular. He also opposes what he sees as the German domination of the European Union. Italy has effectively seen no growth and high unemployment for twenty years – the life of the Euro. In his latest book, "Like a Nightmare and a Dream", Savona claims that the Euro has “halved Italians’ purchasing power” and says that "we need to prepare a plan B to get out of the euro if necessary ... the alternative is to end up like Greece."
The President of the Bank of Italy, Vincenzo Visco, has said that Savona, "has all the capacity and credibility" to fill the post but "two big problems". The first would be applying an anti-austerity program negotiated by Five Star and the League, "which he knows to be completely inapplicable" given Italy's 2.3 trillion-euro public debt. The second, according to Visco, would be that his political positions are "radically and suicidally anti-German ... that could create problems both for him and for us." Visco is here assuming that Italy can stay in the Euro and that there are no benefits from the expansionist policies proposed by the coalition and but only expenditure.
Where he is spot on is in assuming German hostility. The German media has been vitriolic about the new Italian government and Italians in general, particularly since the talk of writing off 200 billion Euros mostly owed to Germany.
Savona calls the single currency a "German cage" and says "Germany didn't change its idea of its role in Europe after the end of Nazism, even if it abandoned the idea of imposing itself militarily,".
However, whilst criticizing those that set up the Euro and European Institutions that, he says, are failing Europe, he denies being Europhobic. In a statement clarifying his position he said, he stood for “a different Europe, stronger, but more equal."
The President’s intervention has triggered what will be a venomous general election with echoes of the Brexit referendum campaign. Di Maio leader of the 5 Star movement has already invoked article 90 of the Italian Constitution, which deals with impeachment and cases of High Treason. Matteo Salvini has accused the Head of State of having “unjustly blocked a man whose only offense was to have defended the interests of Italians too much.”
Matarella will do his best to delay elections as long as possible, whereas the would be coalition will wish them to be held as soon as possible. They may well have planned to provoke new elections anyway. As things stand today there is little reason to suppose that the new parliament will bring comfort to the Italian President. The Lega and the Five Star movement have together won 50% of the votes. According to the opinion polls 55% take a negative view of outside interference in Italian politics and only 17% think it is necessary.
Behind the new Italian vote loom the European Parliamentary Elections to be held at the end of May 2019.
According to the financial newspaper Les Echos, the political crisis “will continue to nourish the anxieties of Italy’s European partners and the markets”. The spread between German and Italian 10-year bond interest rates has already reached levels not seen since 2013.
Whatever happens Matarella is no shrinking political violet. He is from a tough Catholic Sicilian family that has in turn tangled with Fascists and the Mafia, who murdered his brother Piersanti in 1980 when he was President of Sicily. The media is currently clearly on his side and is reluctant to explain the strong arguments against Italian membership of the Euro as presently constituted. The role of Berlusconi is obscure but will be significant.
Even so assuming no further surprises and new elections, if the anti-Euro parties together gain a clear majority his current position will become untenable.
[i] Mortati C., Istituzioni di diritto pubblico, Cedam Casa Editrice dott. Antonio Milani, Padova, 1952, cité dans l’édition de 1975, p. 568.