December 09, 2016
Why Five Star will gain
President Sergio Matterella of Italy is on Monday due to make a decision about the future government - now with only two options on the table - a grand coalition, or a new government. The Five Star Movement has made a proposal to keep Renzi as a caretaker until the decision of the constitutional court in January, which could then be followed by new elections. Whatever option Matterella choose now, there is now an overwhelming clamour in favour of new elections in the spring or summer.
Corriere della Serra writes that Silvio Berlusconi is reconsidering his strategy - in favour of new elections and against a grand coalition with Renzi because he, too, realised that everybody wants elections. Berlusconi has a personal interest in waiting until 2018 because he cannot hold office before then. But that is no longer a political option, and the paper writes that he is now resigned to accepting elections in 2017. Under no circumstance will they give their vote of confidence to Renzi, so this would exclude a grand coalition. There is also concern among Forza Italia that the Lega Nord, its traditional ally, may be aligning itself with the Five Star Movement.
Angelo Panebianco, writing in Corriere, made a comparison with the year 1993 when Giuliano Amato and later Carlo Azeglio Ciampi were technical prime ministers, and when everybody thought the PDS would win the elections in the following year. But the dynamics of the events led to the victory of Berlusconi. Today, there are some similarities. The PD and its leader are discredited. Forza Italia is deflated. Matteo Salvini, leader of the Lega, has also suffered following his alliance with Marine Le Pen. It is hard to avoid the conclusion that the Five Star Movement will be the main beneficiary at the next election. They are unspoiled. But Panebiancho also notes that there are differences between today and then. The Five Star Movement is a party with a head but not with a body.
We would like to point to two important comments about the future of Italy in the euro, and the future of liberalism in general.
Phillipe Legrain notes:
“Renzi was the pro-EU establishment’s best – and perhaps last – hope for delivering the growth-enhancing reforms needed to secure Italy’s long-term future in the eurozone. Muddling through with a weak technocratic-led government amounts to waiting for an accident to happen... In the longer term, Italy’s eurozone membership could be at risk. Unless Italy enacts radical reforms to address its sclerotic growth, it is hard to see how it could ever have a viable future in a dysfunctional monetary union dominated by a mercantilist, deflationary Germany.”
And Matt O’Brien argues in the Washington Post that the liberal centre is losing the battle. He notes that we are celebrating the defeat of Norbert Hofer in the Austrian presidential elections as a victory, when in fact it is frightening that a party that still uses Nazi symbols got 0.5% more votes than Donald Trump did in the US. The real problem, he notes, is that our ability to cover up the structural fall in economic growth - through increasing the number of women in the working population, and through credit bubbles - is ending. And, while the opinion polls do not suggest that a populist could win an outright majority in the next elections, it just takes one upset for a country to pull out of the eurozone and cause a massive global financial crisis.
We see the world similarly to Panebianco. In our view Renzi massively overestimates his chances of winning the elections. We think that his main battle will be to maintain the leadership of his party - which we doubt. A change of leader - there is now much talk about Dario Francheschini, the culture minister - might change the PD’s fortunes, but the PD is divided into many competing factions.
The idea that you can foil the rise of the Five Star Movement through some clever tricks in the electoral law is naive because all parties will adjust to the law, and gerrymandering can easily backfire on those, like Renzi, with a habitual tendency to overestimate their potential. If the system is proportional, it well possible that the next government will be a coalition of anti-euro parties. If it is less proportional - similar to the new Italicum law under which the chamber of deputies will be elected next time - Five Star may gain an absolute majority with a winner’s premium. Heads you lose. Tails they win.