Normalizing Italy

By Paulo Subacchi

LONDON ― Italy’s political exceptionalism ― its chronic inability to marshal coherent governments backed by stable parliamentary majorities ― is weakening Europe and threatening the eurozone’s survival. More than electoral reform is needed: Italy requires comprehensive institutional renewal.

Italy’s particular characteristics put its political system and institutional framework at odds with other democracies, and expose the challenges that it faces in becoming a “normal” country. Indeed, these features have made it difficult to produce from a disparate coalition of political forces and interest groups a government that is greater than the sum of its parts.

First, complex structural reforms have been carried out mainly at the initiative of technocratic governments, such as Prime Minister Mario Monti’s current administration. The governments of Carlo Azeglio Ciampi in 1993 and Lamberto Dini in 1995 implemented significant labor-market and pension reforms, respectively. But elected governments, even those with a large parliamentary majority, such as the last cabinet, led by Silvio Berlusconi, have repeatedly failed to deliver major structural reforms.

Second, Italian politics has long been dominated by “career” politicians who have transformed public service into a lucrative profession. Vested interests often prevail over the public good, and corruption abounds. According to the journalists Marco Travaglio and Peter Gomez, 70 of the 945 members of parliament who were elected in 2008 are under criminal investigation or face pending charges.

Moreover, Italy’s political elites are deeply entrenched, resulting in little turnover at the top. Many members of both houses of parliament have served several terms. If Berlusconi contests the next general election, as he has indicated he will, he will gain his sixth term as an MP since 1994.

Indeed, Italy has become a country for old men. Monti is 69; Berlusconi was 75 when he stepped down in November last year; and none of the possible candidates for Prime Minister is younger than 60. MPs under 40 account for only 7 percent of the Chamber of Deputies. And women comprise just one-fifth of parliament and 15 percent of the current cabinet.

Third, as citizens react to endemic corruption by rejecting traditional political parties, demagogues’ popularity grows. Both Berlusconi and Umberto Bossi, the former leader of the Northern League, began their political careers by pushing agendas that combined populism, corporatism, and euro-skepticism with anti-government sentiment. More recently, the former comedian Beppe Grillo led the populist, anti-corruption Five Star Movement to remarkable results in local elections, and promises a similar, if not better, performance in next year’s general election.

Fourth, the conflicts of interest that plagued Berlusconi for nearly 20 years remain unresolved. Unlike other democracies, Italy does not have firewalls in place to prevent elected officials from pursuing their private interests. As a result, the door remains open to those who view public service as a path to personal gain.

Finally, while highly capable and respected men and women represent Italy in multilateral and other international organizations, with few exceptions, the country’s finest talents do not sit in parliament. Rather, Italy’s political elite is parochial and inward-looking, with little international exposure and experience. In today’s globalized world, this is not only peculiar; it also reduces the country’s global relevance.

Italy’s political exceptionalism results from the gradual decay of the country’s institutional framework. In the early 1990s, after Italian magistrates’ nationwide mani pulite (“clean hands”) campaign exposed systemic clientelism, corruption, and mismanagement of public finances among the country’s established political parties, Berlusconi’s political agenda blocked attempts to spearhead institutional renewal. As a result, public debt rose from 60 percent of GDP in 1981 to 120 percent in 1995, and remains well above 100 percent.

Meanwhile, income inequality has worsened, while Italian firms have become less competitive in global export markets. Italy has the sixth-largest gap between rich and poor among the 34 OECD countries. And, in the last two decades, Italy’s GDP has grown at an anemic 1 percent annual rate.

The process of renewal that began 20 years ago must be revived in order to pull Italy back from the brink of economic collapse. But disrupting the status quo might entail considerable political instability. At a time when reducing uncertainty and strengthening market confidence are high priorities across Europe, this may not be a palatable option. Thus, the threat of instability could perpetuate Italy’s inertia.

Monti’s technocratic government has shown that Italy can behave like a normal country. Italy’s European partners must encourage, rather than block, the country’s efforts to break with its past. To the extent that resolving the eurozone crisis requires a credible commitment to fiscal sustainability, Europe needs Italy to be an institutionally sound and trustworthy partner.

Paulo Subacchi is Research Director for International Economics, Chatham House, London. For more stories, visit Project Syndicate (www.project-syndicate.org).