Italy’s president Giorgio Napolitano is exploring the creation of a second technocrat government to break the political log-jam and calm markets after key parties failed to reach an accord, risking a serious popular backlash.
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7:33PM GMT 03 Mar 2013
Italian officials say the Bank of Italy’s governor Ignazio Visco is front-runner to take over as premier despite warnings that this will be seen as an elitist ploy. It is far from clear whether the Democrats (Pd) in charge of the lower house will back the idea.
The plans amount to a near replica of the outgoing team of Mario Monti, though one greatly weakened by the earthquake upset in the elections a week ago. Almost 57pc of the vote went to groups that vowed to tear up the EU-imposed austerity agenda.
Stefano Fassina, the Pd economics chief, said his party is vehemently opposed to “any form of technocrat government, new or old”, insisting that the election result must be respected. Mr Fassina said 90pc of the country had rejected the Monti agenda and warned that it would be a grave error to try to force through the same reviled plans a second time.
Comedian Beppe Grillo repeated his vow to “bring down the old system” and dismissed the latest talks as cattle market trading by a depraved political class trying to circumvent the will of the people. “I repeat for the umpteenth time, the Five Star Movement will not back any government. It will vote law by law in keeping with its platform,” he said.
“We’re not a political party, we’re a civic revolution. This country is in ruins with two trillion in debts and we have to rebuild it from scratch,” he told a scrum of journalists. In a rhetorical play on the slogans of 1789 and 1917 he exhorted “all citizens” to descend on parliament.
Mr Grillo repeated his call for an “online referendum” on the euro and vowed to buy back €600bn of Italian bonds held by foreigners if his movement gains power, a de facto default and withdrawal from the EMU system. He has in the past called for Argentine-style “haircuts” for bondholders. “Within a year we won’t have enough money left to pay the pensions and public sector wages,” he told told Bild am Sonntag.
His newly-elected army of senators and deputies – fresh-faced idealists in their 20s or early-30s with no experience in public life – met for a “conclave” to thrash out the party line. Most of the 163 “grillini” have never met their leader, or each other.
They crowded into a room at the Hotel Saint John, many sitting on the floor with their napsacks as if it was opening day at university. Their first action was to create a “Google group” to handle logistics.
“Nothing like this has ever happened before in the history of the Italian Republic. We are seeing a true crisis of the regime,” said Professor Luca Ricolfi from Turin University.
Investors have discounted Mr Grillo’s wild rhetoric as comic chatter, but his relish for shattering taboos in putting unthinkable ideas into play. “People in Brussels can handle old-style politicians like Silvio Berlusconi but Grillo really worries them because this is a protest against the entire system, and they are afraid it is spreading to other countries,” said Giles Merritt from Friends of Europe.
The EU policy elites are increasingly alert to the danger of losing popular consent for the EU Project. European Central Bank governor Benoit Coeure said Europe must pay more attention to the “social contract” if it is to avoid feeding “nationalist temptations”.
Mr Coeure warned that record unemployment across much of Europe – reaching 59pc for Greek youth — was eroding the job skills of a generation and doing lasting damage to future growth,
While the tone is changing, there is no sign yet of a retreat from fiscal belt-tightening. “Given that average debt exceeds 90pc of GDP in the EU, I don’t think there’s any room for manoeuvre to leave the path of budgetary consolidation,” said EU economics chief Olli Rehn.
“We won’t solve our growth problems by piling new debt on top of our old debt,” he said. Defying his critics, Mr Rehn said John Maynard Keynes himself would not be a Keynesian today’s circumstances.
Yet Mr Rehn also warned Germany politicians that it would be courting fate to push Cyprus into default and exit from the eurozone in the belief that the island is too small to pose a contagion risk. “Even if you come from a big EU country, you should be aware that every member of the euro zone is systemically relevant,” he told Der Spiegel.
Separately, it emerged that the eurozone bail-out fund (ESM) may not be used after all to recapitalise banks, even once the banking super-regulator is in place. Klaus Regling, the fund’s chief, said opposition from the creditor states may kill the idea altogether.
If so, this will breaches a summit accord in June by EU leaders to deploy the ESM directly to break the “vicious circle” between banks and sovereign states.
Failure to implement the deal would be a blow for Ireland and Italy, leaving them shouldering the full burden left from a bank crisis that was partly caused by northern creditors. The International Monetary Fund said it is imperative that the EU upholds the specific pledge made to Ireland in the summit text.
Germany, Austria, Finland, and Holland have all all said they would not let the ESM cover “legacy assets” left from the bubble. They now seem to be resiling from the accord altogether
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