Italian Premier Gains Leverage on Reform
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Version 0 of 1. Prime Minister Matteo Renzi of Italy is stronger after his country’s weekend presidential election. Mr. Renzi has consolidated his dominant position by persuading the electoral college, made up mainly of members of the Italian Parliament, to choose Sergio Mattarella as president against the wishes of his quasi-partner, the former prime minister Silvio Berlusconi. The weekend’s maneuvering probably allows Mr. Renzi to accelerate reforms of the economy, the political system and the judiciary. He mustn’t waste the chance as Italy is living on borrowed time. Mr. Renzi, the leader of the center-left Democrats, has been relying on an uneasy pact with Mr. Berlusconi, the much-diminished leader of the center-right Forza Italia, since gaining power last year. The two are not in a formal coalition. But Mr. Berlusconi has been supporting Mr. Renzi on many key issues. The Italian prime minister has needed his rival’s support partly because he does not have enough votes in the Senate, the country’s upper house, to push through an essential constitutional change — the removal of the Senate’s power to bring down governments. That is important because the current system makes it hard to govern the country without elaborate deals. Mr. Renzi also needed Mr. Berlusconi’s help because many members of Parliament from his party were chosen when a predecessor was leader. They are more left wing than he is and could not be relied upon to support various reforms, especially those that aim to liberalize the economy. One downside, however, of Mr. Renzi’s alliance with Mr. Berlusconi is that it has infuriated his left wing. They view it as a pact with the devil — partly because Mr. Berlusconi beat them in three elections and partly because of his poor ethics, including a tax fraud conviction. By nominating Mr. Mattarella as president, a largely ceremonial post, Mr. Renzi simultaneously united his own party and divided Berlusconi’s. In the process, he reinforced his authority. Although Mr. Mattarella is a center-left politician, he has kudos with the Democrats’ left wing because he resigned from a government in 1990 when it passed legislation favorable to Berlusconi’s media interests. That’s also why the media tycoon didn’t want him. Mr. Berlusconi seems to have hoped that Mr. Renzi would fail to secure Mr. Mattarella’s election if enough dissident Democrats objected in Saturday’s secret ballot. In the end, the Democrats united. Even worse for the aging tycoon, many of his own members of Parliament supported the new president. They are frustrated because Mr. Berlusconi is more interested in sorting out his own legal and business problems than providing a dynamic vision to take the center-right back into power. There is one potential blemish on Mr. Renzi’s victory. He still needs Mr. Berlusconi to push through legislation, especially to finalize the Senate reform. If the pact between the two men is irreparably damaged, the prime minister could yet rue his Machiavellian maneuvers. But this is probably not so, as he still has Mr. Berlusconi over a barrel. He is able both to cause damage to his quasi-ally’s media interests and to help him with his legal problems. So how will Mr. Renzi use his strengthened authority? The government is promising to accelerate reform with new measures to improve the country’s weak educational system and make the civil service more efficient. It also says it will focus more on implementing existing reforms and complete the constitutional measures. Mr. Renzi’s record on reform has been mixed. In his first months as prime minister, he was criticized for announcing plans but doing little to implement them. He ignored many recommendations of a review on how to rein in public spending because they might give him political problems. Mr. Renzi also gave low-income voters a cash giveaway, a move that looked like a thinly disguised bribe. And his eye-catching reform of the labor market was diluted: It didn’t apply to either existing contracts or the public sector. After years of stagnation and recession, the Italian economy should grow again this year. But that won’t owe much to the government’s own efforts. The European Central Bank’s quantitative easing program, which will involve purchasing huge amounts of government bonds, has already bolstered Italian export potential by driving down the value of the euro and cutting the state’s interest rate bill on its vast debt. The plunge in the oil price has also been a boon for the Italian economy. But this boost will be only temporary. It is vital that Mr. Renzi uses the breathing space to press on with reform as Italy suffers from three big economic ills: high unemployment, virtually no growth and government debt that is nearly 140 percent of gross domestic product. With the E.C.B. spraying so much liquidity into the market, bond investors are not concerned about any of this. But there are risks on the horizon: in the short run, the possibility that Greece will blow up, causing contagion to Italy, and longer term, the possibility that the rest of the eurozone recovers and interest rates have to rise, making Italy’s debt unsustainable. Mr. Renzi must not waste the opportunity afforded by his big victory. Hugo Dixon is editor at large of Reuters News. |