Saturday, September 3, 2011

An Italian spring for winter?

Facing a hot autumn

Prime minister Silvio Berlusconi remains in office, writes Toby Abse, but his Bonapartist regime has come to an end

Image: Napoleon Berlusconi
Napoleon Berlusconi

Italy's largest trade union centre, the Italian General Confederation of Labour (CGIL), has called a one-day general strike for Tuesday September 5. The walkout comes exactly a month after Italy ceased to have any real control over its economic and fiscal policies and was brought under the direct control of the European Central Bank and a European Commission dominated by France and Germany - rather like a company on the verge of bankruptcy being taken into administration or receivership. It may indeed be the case that the August 5 letter from ECB president Jean-Claude Trichet to the Italian government is similar to other letters already sent to those in Greece, Ireland, Portugal, Cyprus and Spain, but these governments had respected confidentiality rather than engaging in a partial leak, as Berlusconi did.[1]

Arguably what occurred in Italy was more blatant than similar effective losses of sovereignty in Ireland, Greece or Portugal, or, it might be suggested, in Spain. In the case of the latter, premier José Luis Zapatero decided to appease the markets in a more conventional fashion by calling an early general election and announcing he would not stand again - although some might argue that the recent statement by Spanish leaders announcing their intention to change the constitution to incorporate a fixed 0.4% cap on the budget deficit indicates Spain is being subjected to similar pressure.

It is interesting that the clearest statement about Italy's current situation from forces with parliamentary representation has come not from the former 'official communist'-dominated Partito Democratico, but from the leader of the populist Italia dei Valori (Italy of Values), Antonio Di Pietro, who said: "Italy is under the tutelage of the EU and a country under tutelage is not a free and democratic one." Less surprisingly, the clearest from a non-Italian has come from the Irish Socialist Party MEP, Paul Murphy, who pointed out that there had been "a massive shift away from democratic accountability since the start of the crisis" and added: "There needs to be a check on the enormous power of the ECB, which is unelected, and has basically held a government to ransom".[2]

Italy first became a prime target for speculators in early July. At first it seemed as if an austerity package - of a sort that was diametrically opposed to the pre-election tax-cutting bonanza that Berlusconi had in mind as a way of regaining popularity after his four referenda defeats - would put an end to the panic. However, neither the unprecedented rapidity with which this grim package was passed by both the Chamber of Deputies and the Senate (within three days, becoming law on July 15) - with the contemptible collusion of the Partito Democratico, which just made some pro forma protests about its socially unjust nature, whilst doing nothing to obstruct its enactment - nor the temporary solution to the Greek debt problem devised by the July 21 European summit was enough to save Italian government bonds from speculators. At least some of these were engaging in 'short selling' - in effect betting on an Italian default and the collapse of the entire euro zone. Although the origins of this speculative attack were probably transatlantic, if usually well informed commentators in the Financial Times are to be believed, the problem was clearly exacerbated by the decision of the Deutsche Bank to sell the majority of its portfolio of Italian government bonds - a tactic emulated by other European banks, albeit on a lesser scale.

Obsessions

Once the July 15 austerity package was passed, Berlusconi's attention reverted to his usual obsessions - his prime concern was to start the parliamentary journey of a new law popularly known as the 'long trial' which would both entitle defendants, or their lawyers, to call as many witnesses as they chose, without the existing restrictions on potential witnesses on the grounds of irrelevance or repetition, whilst preventing the use of evidence from closely related trials, in which a guilty verdict had already been reached. The immediate purpose of this bill is to wreck the prosecution's chances of getting a conviction in Berlusconi's ongoing trial for giving a $600,000 bribe to David Mills in return for false testimony in earlier court cases, but these provisions would also wreck thousands of other unrelated trials, including many that involve the Sicilian Mafia, the Neapolitan Camorra and the Calabrian 'Ndrangheta.

Berlusconi's image outside Italy has hardly been improved by this and other scandals, while his finance minister, Giulio Tremonti, also lost his own aura of respectability as a result of the continuing row over the accommodation in Rome provided for him by his former political lieutenant, leading to comments about the suitability of an apparent tax evader to head the finance ministry. Whilst such conduct was doubtless inappropriate, it seems so trivial in comparison with the crimes and misdemeanours of Berlusconi and his old associates, Cesare Previti and Marcello Dell'Utri, that one is bound to wonder whether those calling on Tremonti to go were in fact motivated by political or personal animosities rather than a principled adherence to any ministerial code of conduct.

The weeks slipped by without any sense of serious governmental concern about the national finances (as distinct from those of the premier and his finance minister), and by late July Berlusconi was under increasing domestic pressure - including from opposition parties, president Giorgio Napolitano, the main employers' organisation, Confindustria, and the Bank of Italy - to make some public statement about economic policy. He had been maintaining a deafening silence on the question after it had become apparent that his hopes of bringing in tax cuts before the general election due in spring 2013 had been dashed by the turbulence of the markets, whose demands for a reduction in both Italy's budget deficit and massive accumulated debt, now approaching 120% of GDP, made such giveaways totally impossible. The last five trading days in July saw a 5.3% fall on the Milan stock market.

On July 27 an appeal for a change in economic policy (or discontinuità, which some interpreted as code for Berlusconi's resignation) and a 'pact for growth' was presented by an unusual assortment of economic interest groups ranging from Confindustria and Abi (the Italian bankers' association) to the two biggest trade union confederations. Given the prevalence of the rhetoric of social partnership in the mainstream media, it needs to be firmly stressed that this appeal was organised by Giuseppe Mussari, the leading figure in Abi, and Emma Marcegaglia, the president of Confindustria - in other words, the representatives of large financial and industrial capital - with the representatives of small business and the trade unions playing a rather subaltern role.

Despite his initial reluctance to bow to pressure from the 'social partners' (parti sociali), Berlusconi was pushed into agreeing both to make an official statement to the Italian parliament on what was scheduled to be its last sitting before a five-week holiday and to holding a meeting with the parti sociali to at least consider their proposals (something which the opposition had already agreed to do on the same day). At this stage the pressure that Berlusconi was facing, and to a very large extent resisting, was essentially domestic. In the event neither Berlusconi's statements to both houses of the Italian parliament on August 3 nor his meeting with the 'social partners' the following day were of any avail in halting the downward pressure of the markets. Berlusconi's lacklustre speech, claiming that Italy's economy was fundamentally stable and containing very little that was new in terms of specific policy measures, was read out rather mechanically from an uninspiring text, very evidently drafted by a committee. The response was a further large stock market fall. Even worse, the spread between Italian and German 10-year government bonds reached a new record of 389, while the shares of the leading Italian banks Intesa Sanpaolo and Unicredit fell by 10.35% and 9.33% respectively.

Humiliating

Ultimately Berlusconi's obstinate refusal to change course led to the extremely humiliating position of being put under direct pressure from the European Central Bank in Frankfurt, which refused to buy any more Italian government bonds unless he obeyed their instructions to the letter. He attempted to give the impression that he was now at last being treated with the respect he deserved in a series of telephone conversations with European leaders eager to devise a common response to what was a European, and indeed worldwide, crisis. But this obvious propaganda exercise was only taken at face value by the notoriously subservient team of newscasters on the increasingly surreal RAI 1 evening news. It soon became evident that Berlusconi had only been contacted after Angela Merkel and Nicolas Sarkozy had reached a common position to be imposed on Italy via the ECB.

Berlusconi rapidly had to make it clear that he intended to balance the budget by 2013, rather than 2014, the year mentioned in the austerity package passed by parliament on July 13. It has been widely suggested that the confidential letter sent to him by Trichet, which he has so far refused to make public, despite numerous and repeated opposition requests on the grounds of wider national interest, actually required huge steps towards achieving the objective by 2012. The primary rationale behind the original package had been to postpone the worse of the cuts until 2013-14 in the belief that their unpopularity would be borne by the next government, not the current one. Since the next government might well be a government of the centre-left, the electorate would hopefully repent of its abandonment of "the greatest prime minister Italy has ever had", as Berlusconi has modestly described himself.

Pressure from the ECB led to a second austerity package on August 12, exactly four weeks after the first. This has so far taken the form of a governmental decree and will have to be ratified by both houses of parliament within the next few weeks. The decree was passed at a cabinet meeting in the evening after the closure of the markets for the day, demonstrating Berlusconi's continuing fear of the latter. Many suspected that the general European recovery after the speculative assault on France earlier in the week might be no more than a 'dead cat bounce' and the further spectacular collapse of August 18 suggested this could be the case, now that worries about the German growth rate have added to the concerns about the French banks' exposure to southern European bonds.

The new package's scale - €45 billion in additional cuts and taxes - is a clear demonstration that the previous one proved ineffective, a story that is eerily reminiscent of the pattern of cuts packages in Greece, Portugal and Ireland over the last year or two. Predictably workers and pensioners, not the wealthy, were targeted, despite a lot of discussion about a one-off wealth tax earlier in the week. The unjust and vindictive nature of the package - singling out those unlikely to have voted for Berlusconi's Popolo della Libertà - can be seen in the provision for a two-year delay after retirement in the payment of the lump sum redundancy payments traditionally given to public sector workers at the moment when they become pensioners. Another equally outrageous assault was the clause withholding from public sector workers the payment known as the 13th month (traditionally an automatic bonus) in the event of their departments failing to meet governmental targets. Even those fond of the principle of payment by results might have imagined that it would have been the people at the top of the organisation who might be penalised, not the most humble employees.

In addition three public holidays - May Day, Liberation Day and the anniversary of the proclamation of the Republic - are to be abolished. Religious holidays, protected by the Italian state's treaty with the Vatican, are unaffected. Leaving aside the absurdity of increasing the number of working days at a time of rising unemployment, this is an obvious symbolic assault on the rights of the working class celebrated on May 1; and on the notion of a republic based on the anti-fascist resistance, whose celebration on Liberation Day Berlusconi has ostentatiously boycotted and has always been a source of annoyance to those of his cabinet (such as defence minister Ignazio La Russa) who had spent their youth beating up leftwing activists and praising the Duce.

The pension age of women in the private sector will now be raised towards 65 at a greatly accelerated pace, starting in 2015 and reaching the upper age limit in 2027 (a provision already brought in for public sector workers).

Whilst much has been made by the government and more rightwing media of tax increases on higher incomes, a large part of these goes undeclared. While the Bank of Italy has estimated that in 2008 around one million people earned more than €90,000, only just over 500,000 taxpayers declared an income exceeding that amount in 2009. The figures for the sale of luxury cars back this up. In 2007, about 450,000 luxury cars were sold and even after the world financial crisis the 2010 figure was still around 350,000. It seems unlikely that there is just a small group of luxury car owners who buy a Mercedes every other year, even in a society of conspicuous consumption; it is far more likely that a larger group does so more irregularly. The average incomes declared by many are not remotely credible[3] and tax evasion is clearly occurring on a massive scale.[4] But this budget, like all of those dreamt up by Berlusconi and Tremonti, places the burden on workers in large workplaces, whose tax is deducted at source.

The introduction of a 20% tax on unearned income from investments (other than state bonds, which will continue to be taxed at a lower rate), bank accounts and so forth, can hardly be regarded as a punitive wealth tax either, even if this increased rate is a bit higher than the very minimal existing 12.5% tax on unearned income. Any serious wealth tax would have to be a property tax that singled out buildings whose existence could not be concealed and unsurprisingly no such tax has been introduced.

The package in its original form involved €8.5 billion of cuts in ministerial spending and €10.5 billion in regional and local spending in 2011-12, whilst the 20% tax on unearned income and the one-off tax on higher incomes in the private sector were supposed to raise €1 billion each. The one-off tax on higher earners was abandoned after a seven-hour meeting between Berlusconi, Tremonti and representatives of the Northern League on August 29, whilst a further attack on pensions was proposed instead - time spent on military service or studying for a degree would no longer count towards the 40 years service required to qualify for full work-related 'seniority' pensions, something which would impact disproportionately on public sector employees such as teachers. The amounts covered by increased national taxation are relatively small, so the package implies either more local taxes or massive cuts in public services of a kind that have not as yet been spelled out in any detail.

Feuding

The fading of Berlusconi's power is demonstrated by the internal feuding within his party, the PdL, that has broken out in the wake of the austerity decree. Former minister Antonio Martino has called the measures "unacceptable", complaining they both increase taxes and fail to address the problem of Italy's lack of economic growth. A group of about 20 PdL deputies have been devising counter-proposals, which in effect attack the decrees from an even more neoliberal position - opposing the increased tax on higher earners, advocating an increase in everybody's pension age to 67, demanding the privatisation of 700 municipal enterprises within 18 months and so forth.

Roberto Formigoni, the PdL president in Lombardy, has been critical of the austerity package both because of the swingeing cuts in funding to regional and local government and because of the tax increases it imposes, which contradict Berlusconi's promise that the PdL would never "put its hands in the pockets of Italians". Instead he advocates the sell-off of state television, stating: "Today a public RAI no longer has any sense. Put on the market, it is an enterprise that would rapidly find buyers - I give a name at random: Murdoch - and could yield between €4 billion and €5 billion."[5] It is not clear whether this is extreme neoliberalism - a bit unlikely in somebody notorious for funnelling Lombard regional resources and contracts to dodgy 'not for profit' outfits linked to the reactionary clerical organisation, Communion and Liberation - or if it is designed to provoke Berlusconi personally, given that he and Rupert Murdoch, one-time business partners, have become bitter enemies in recent years. In short, Formigoni may be in the process of detaching himself from his current secular patron in the wake of the PdL debacle in the Milanese local elections in May.

Berlusconi himself is trying to blame the austerity package on Tremonti and appears to be open to accepting some opposition proposals. The modifications already agreed on August 29 demonstrate that his priority is a settlement of personal accounts with his increasingly unpopular finance minister rather than giving consistent backing to measures which were decided at a cabinet meeting that he himself chaired and formed the basis of a decree that he asked Napolitano to sign without delay. Whilst Berlusconi is claiming he will not resort to votes of confidence and that minor changes are acceptable, provided the overall figure of the package remains the same, such arguments and divisions within the governing party will not increase confidence either within Italy or amongst foreign investors that the premier is capable of seeing the measures through parliament within the short time scale the nervous stock markets, impatient with the convoluted and labyrinthine negotiations that have traditionally characterised Italian politics, now require. The committee stage of the bill started in the Senate on August 22 and it is due to go to a plenary session of the Senate on September 5, to be followed by its rapid passage through the Chamber of Deputies. Even this timetable may not be enough to appease the markets and further delay as a result of the continuing internal wrangling (both within the PdL and between the PdL and the Northern League) may well provoke another major crisis.

Berlusconi's clinging to the premiership has clearly weakened Italy's situation in recent months, since his resignation would undoubtedly have been seen as a positive sign by the markets and lessened the speculative attack on Italian government bonds. However, it would be very foolish to deny that there is a more general crisis of the euro zone, which has now spread to France, whose banks hold a great deal of Italian and Spanish as well as Greek and Portuguese bonds; or that negative developments in the USA, such as the deadlock over increasing the national debt, the downgrading by Standard and Poor's or the slowdown in American growth rates, have also contributed to the recent worldwide turbulence on all the stock exchanges of the advanced capitalist countries. The European Union as a whole is clearly heading for recession, as the growth rates for the second quarter of 2011 make all too plain. Italy's 0.3% is rather better than the EU average of 0.2% and clearly better than France's and Portugal's zero growth as well as Germany's and the Netherland's 0.1% and Spain's and the UK's 0.2%.

The proposal of Merkel and Sarkozy for a sort of euro zone economic government and pressure on all zone countries to incorporate a clause about balanced budgets in their constitutions - something which has already been demanded of Italy in Trichet's letter - only offers a partial solution in view of Merkel's refusal to adopt Eurobonds, at least in the immediate future, and their Tobin tax proposal has filled the bankers and speculators with horror.

Left response

It also needs to be emphasised that any post-Berlusconi government of national salvation of the type that both the Partito Democratico and Pier-Ferdinado Casini's Union of the Centre favour might prove the worst possible solution for the working class, as any temporary broad coalition that would not have to face the electorate as a bloc would be very likely to carry out the most reactionary programme of privatisation, liberalisation and savage cuts that the ECB and Italy's own bankers and industrialists could devise. Whilst the PD has been forced to some extent to protect itself against competition to its left from Nichi Vendola's Sinistra Ecologia Libertà (SEL) and make some noises about the need to curb tax evasion, tax the rich and impose fewer cuts on the poor, its enthusiasm for a broad coalition is likely to outweigh any vestigial belief in social justice.

SEL's own record of participating with corrupt politicians in a regional coalition in Puglia hardly lives up to its leftist rhetoric at the national level, where, having no representation in either the Chamber or the Senate, it is not being put to the test. Although Giuliano Pisapia's recent interview with La Repubblica may represent the personal position of Milan's SEL mayor rather than the collective position of SEL as a whole, this appalling endorsement of a technocratic solution to the capitalist crisis deserves to be quoted at length. He supports a governo tecnico (technocratic government) "formed of people who have capacity and experience in the economic field. Beyond a credibility at the international level, this would take us outside the receivership on the part of Europe in which we are living. On the question of who to chose, I trust in the wisdom of president Napolitano - it is a guarantee for everybody. Only somebody who has no interest at stake - such as protecting the forces he represents or collecting consensus in view of future elections - can be the right person to guide the country out of the crisis."[6] No Financial Times or Sole 24 Ore columnist could have put the anti-democratic position of the ruling class across with more eloquence. Whilst Rifondazione Comunista (PRC) has throughout the current crisis opposed any class-collaboration, it seems to have increasing difficulty in producing and distributing its daily paper, Liberazione, which is far less impressive in terms of size and coverage than it was before the PRC's loss of parliamentary representation and the defection of what became the nucleus of SEL.

Within the trade union movement, two of the three major unions, the CISL (traditionally Christian Democratic and still having a clearly Catholic identity) and the UIL (associated with two now defunct parties, the social democratic PSDI and the Republicans, placing it in the secular centre), have consistently collaborated with the current Berlusconi government, as well as eagerly pursuing sweetheart deals with 'no strike' clauses in Fiat's factories - deals consciously designed to exclude the CGIL-affiliated FIOM from the factories in a manner reminiscent of the late 1950s.

Even the formerly communist-dominated CGIL under Susanna Camusso's leadership has been far too willing to work with Confindustria - signing common programmes that involve a commitment to privatisation and then repudiating parts of them in interviews is not a convincing line. In fact FIOM's heroic rearguard defence of workers' rights at Fiat's plants in Turin and Pomigliano have often been sabotaged by the CGIL's dominant faction, which often wishes that its own metalworkers were as acquiescent to the demands of the ruthless Fiat bosses as the engineering workers' unions affiliated to the CISL and the UIL. Moreover, Camusso, utterly disgracefully, ensured that the CGIL joined the CISL and UIL in signing an agreement with Confindustria in June that in effect undermined the workers' rights that FIOM had sought to protect.

Nonetheless, Camusso has had to respond to pressure from both the union confederation's employed members and the large pensioners' organisation affiliated to it, which expect the union bureaucrats to defend wages, conditions and pensions from the kind of attack embodied in the decree that Berlusconi's cabinet passed on August 12. The effective abolition of national pay bargaining and the ending of three public holidays seem to be the key issues that have pushed her towards calling a general strike, set for Tuesday September 6. She has also emphasised that an attempt will be made to involve the CISL and UIL in coordinated action.[7] Whilst the response of the CISL and UIL leaders to the August 12 decree could hardly be described as enthusiastic, it ought to be emphasised that on a number of recent occasions they have not joined the CGIL in protest strikes and their initial reaction to Camusso's letter, inviting the CISL and UIL to join the CGIL's walkout, was quite hostile.

Sections of the PD reacted to the general strike call with acute hostility, arguing that it pre-empts the role of parliament - which is precisely why anybody genuinely concerned with the welfare of Italy's workers, pensioners and unemployed should welcome it wholeheartedly, given that no group in the parliament elected in 2008 can be trusted to defend the poorer sections of the population with any consistency. Whilst it would be foolish to exaggerate the impact of a one-day protest strike, industrial action early in September might trigger the kind of hot autumn that the economic and political elites are anxious to avoid.

Notes

  1. See Barbara Spinelli, 'Mostrarci quella lettera' La Repubblica August 17.
  2. The Guardian August 22.
  3. Repubblica August 14 gives detailed figures.
  4. The Bank of Italy has further estimated that the Italian state is cheated out of €120 billion every year. It believes that entrepreneurs and the self-employed hide 56% of their income and that the super-rich declare only a piffling 17% of their property to the tax authorities.
  5. La Repubblica August 17.
  6. La Repubblica August 14.
  7. Interview with La Repubblica, August 14.

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