Governments and financial markets are run by hardheaded men and a few women who deal with facts, like Mr. Gradgrind… they evaluate the data and don’t let emotions get in the way of their pursuit of power and profit, right? Well, no, not exactly. The markets yo-yo at every half-truth and successful politicians must control the image before the facts. Rumor is a much better metre than Gradgrind’s “facts”: I, from the orient to the drooping west,
Making the wind my post-horse, still unfold
The acts commenced on this ball of earth.
Upon my tongues continual slanders ride,
The which in every language I pronounce,
Stuffing the ears of men with false reports.
And if some of them are true, no matter, they will give credence to the false ones. Still, Shakespeare’s references to reports in many languages flying from east to west on the wind ring true today.
Italy’s crisis is nowhere near as dramatic as Henry VI’s nor as bloody but like the Wars of the Roses, it has some striking actors. Like Rumor, Italy’s crisis is fuelled by reports in Greek, in Portuguese and Spanish, and in English. Italy’s Gradgrind “facts” are bad, but hardly worse today than they were a year or two or three ago. Italy’s ability to repay its debts is no less either. But if everyone, the markets, think that it is weaker, then it is. And if the government is unable to lead, then the crisis becomes real. Here the rivalry between the Prime Minister and the Economy Minister is crucial, a rivaly which is personal and policy-driven.
Center stage at the moment, and enjoying every minute, is Giulio Tremonti, Minister of the Economy and Finance and this week at least, savior of the Italian economy and possibly the euro too. There has been almost a year of grumbling in the center-right coalition. Tremonti has been calling for spending cuts and prime minister Silvio Berlusconi and the rest of the government wanting to spend their way back into better approval ratings.
On Thursday, he presented his budget to the Senate. The Prime Minister’s seat next to his was conspicuously empty and Tremonti was happy in the limelight with a speech full of his trademark sarcasm and I’m-cleverer-than-you remarks ending with the warning that “if we don’t act now, then we will be like the Titanic and even the first class passengers suffered”. Curiously he pronounced the word “titanich” as if it were Yugoslav partisan. Maybe he needs that kind of ruthlessness. In any case the simile was apt as many more first class passengers survived than second class or steerage and his budget hits the middle and poorer classes heavily. Corriere della Sera, hardly a diehard anti-Berlusconi rag, reckoned that families would be paying €1,000 more in the coming year.
Health service charges have gone up, tax deductions are down. Government payments to cities and regions (the equivalent of US states) are cut which means that their social services will be reduced or local taxes will be increased. Taxes on fuel prices went up 6 cents a litre last week with gasoline at €1.60 per litre and diesel at €1.50.
But there was no obstruction from the opposition; the bill passed without debate in both houses with each party just declaring how they would vote and why. The opposition found itself in a corner; if they had tried to stop the measure, then the speculators would have continued, the spread between Italian and German government bonds would have continued to widen and the crisis would have moved into catastrophe mode. And the opposition would have been blamed. Instead, they accepted President Napolitano’s council and allowed the budget through in two days.
Tremonti recognised their support in what was a genuine expression of gratitude. He concluded, though, in his more normal supercillious vein with a clear stab at Berlusconi. He quoted Livy “Hic manebimus optime” literally translated as “we will stay here very nicely”. Actually, he was saying “don’t think you can fire me because I have the support of President Napolitano and if you try, then the rating agencies, the ECB, EU and above the speculators will shaft Italy”. It was another salvo in the longrunning war between Berlusconi and Tremonti.
A month ago, Tremonti put forward his plans for a serious austerity budget only to have Berlusconi tell the world that “Tremonti does not run the show. Cabinet decisions are taken collectively”. The proposal that appeared last week was a pale copy of the original; €47 bn saving but only €2 this year and €5bn next. €20 bn for 2013 after the elections and another €20bn in 2014. It also included a clause which would have delayed payments of damages in civil cases; happen that a verdict was expected in which the defendant was Berlusconi’s Fininvest. This was blatantly pro-Berlusconi measure and Tremonti denied any hand it it. In any case Napolitano made his disapproval very clear and the clause was removed. But to make Berlusconi pique even more explicit, he gave an interview in which he said that Tremonti was not “a team player”
Tremonti is not only under attack from his boss. One of his close advisors in the Ministry, Marco Milanese is under investigation for corruption. He is alleged to have taken payments in return for positions and contracts from the ministry as well as having a highly extravagant lifestyle. He apparently turned down the offer of an Aston Martin because it was “second hand” and took a Ferrari instead. He relived a film about “Christmas in New York”, same hotel and same film stars (Cristian De Sica and Sabrina Ferrilli). Worst of all for Tremonti, he paid €8,500 a month for the appartment that Tremonti occupied for the last year, echoing another Berlusconi minister who was forced to resign when it was discovered that his house was paid for by someone else “without the minister’s knowledge”.
Milanese is also alleged to have been carrying out Tremonti’s duties without any official delegation of authority and to have been rather too close to the minister. The mudslinging has not begun yet.
On the prime minister’s side there is plenty of mud which has already been slung and plenty more waiting in his various trials but apart from the personal scandals, he is politically weaker than ever. Local elections and referendums in May dealt him serious blows and his approval ratings are below 25%. This last week he made no public appearances, avoided the Senate debate and arrived late for the Chamber vote without speaking. The hero of the hour is Napolitano. The Italian president is a largely symbolic figure like Queen Elizabeth but he has residual authority which he uses when the normal executive is lacking. It was his mediation which took the budget through Parliament and Berlusconi felt left out (and was).
He has also never liked giving bad news and he also feels that Tremonti’s success is somehow his failure. And then the civil damages verdict which he was so afraid of was published awarding another rival €560m, a hefty sum even for Finivest. It was not a good week for Berlusconi.
Paradoxically, the weakness of the two men means that neither can trump the other, at least in the short term. If they tried, then the sharks from the financial markets would rush in the results would be disasterous not just for Italy but the whole of Europe. So for the moment, they are the odd couple who have to put up with each other though the clouds on the horizon are not far away.
The budget had no immediate measure to cut the costs of politics. Italian parliamentarians are the highest paid in Europe and they have very generous pensions afterwards. On Monday, Italians will be paying more for their health service and pension increases will be stopped for many and yet cuts in deputies’ perks will only take effect after the next elections.
Italians’ unhappiness about politicians’ greed is growing; it hasn’t reached the point of violence as we’ve seen in Greece but as the cuts begin to be felt, there is bound to be some reaction.
There is the drama of the big players in Italy which makes for good theatre but the country’s discontent is very real and needs no Rumor to propagate it.
This was published in Foreign Policy on 15 July
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