Despite probably being the single most widely criticised act by an Italian President, Sergio Mattarella´s veto on 27 May, which had resulted in postponing the formation of a yellow-green coalition government by five days, and roiled Italy on financial markets, was correct from both a constitutional and political perspective. His decision stopped a very dangerous path that could have led to unpredictable consequences, something that was not the intention of any Italian political actors, and bought time for the Italian political system to reorganise and stabilise.
Whether the president’s manoeuvre has been able or not to tame the ‘barbarians entering Rome’, is still to be seen. But Mattarella is now handing over leadership of a state apparatus that is again under control to the Italian anti-establishment forces. This is something that should be prized by both European partners and market operators.
Regardless of the specific aspects of this complicated story, Italy’s political troubles represent yet another wakeup call for Europe: The current European approach of muddling through must be overcome and new strategies to achieve more effective compromises among European partners found. Otherwise we should get use to see the building blocks of what the EU is built upon become increasingly subject to national electoral cycles, where even the most banal accident can substantially compromise what once was believed to be irreversible.
Mattarella’s rescue of national sovereignty
Eighty-eight days after the general election, the Italian political crisis seems to have be resolved, and many observers will praise the ability of President Mattarella to manage what had become quite a complex situation. In fact, while the formation of the yellow-green coalition government brings ‘the barbarians to Rome’, and while the conflict with the EU is not over, the new anti-establishment coalition government appears today to be much less a scary and a more reliable partner than one week ago. The president’s decision has thus stopped a dangerous driver within Italian politics. Moreover, the designation of Professor Giovanni Tria, instead of Professor Paolo Savona, as Ministry of Economy should send a strong message to market operators about Italy’s intentions to honour its debts.
Though Mattarella’s first veto could have led to snap elections – probably sending the country down a dangerous path – the Italian President’s decision to block the appointment of Paolo Savona as Ministry of Economy has entirely depended on Mattarella’s judgment that was clearly expressed in his public speech on 27 May. According to his assessment, the designation of Paolo Savona as Minister of Economy would have most likely, if not inevitably, pulled Italy out of the euro under the immediate recantations of the financial markets:
“The designation of the Minister of Economy is always an immediate message of trust or alarm for economic and financial operators. For this ministry, I asked for an authoritative political exponent of the majority, consistent with the program agreement. An exponent who – beyond the esteem and the consideration for the person – is not seen as a supporter of a line, often manifested, that could provoke, probably, or even, inevitably, the Italians’ exit from the euro”, said Mattarella.
If Mattarella’s assessment was correct, he not only had the right as president, but also the duty to exercise his veto power under Article 92 of Italian Constitution. Besides the legal provisions that he used to justify his decision – such as Article 92, 47 (on the protection of savings) or 87 (on the respect of international treaty) – Mattarella also based his judgement on the preservation of the entire republican architecture and national sovereignty, including maintaining the possibility for Italy to choose upon its European future– but as something that should come as a political decision in accordance with constitutional rules and not as something triggered by external forces such as the financial markets.
Fragility of Professor Savona’s strategy
The last week should have been extremely hard for Paolo Savona as well, and probably unfairly so – at least until he was appointed Ministry of European Affairs within the new administration. The 81 year-old professor, in fact, is far from a dangerous subversive, and his position on the Eurozone is not so dissimilar to those of the French President Emmanuel Macron or many EU-supporters that are unhappy with the current state of the European Union. Moreover, there is nothing objectionable in having a ‘plan B’ for exiting the euro, and it would not be surprising if all European governments have such a plan. Finally, the Professor is quite correct in arguing that any renegotiations of the rules of the European Monetary Union could only benefit from a credible threat from its weaker partners, which would in fact help reach a better overall agreement. This is in line with almost any bargaining theory and could be even deemed common sense.
So was Mattarella wrong? The problem with Savona’s strategy is that it is endangered by a simple contradiction: as more a country is in need of renegotiating European deals (for instance, because the high burden of its public debt), as less presenting a credible threat to its euro partners would be tenable due to financial markets’ reactions. Unlike other components of a monetary union, markets have much less interest in finding a deal with a revisionist country.
Unfortunately for Professor Savona, the Five Star Movement and Lega have shown to be highly incapable of coping with the fragility of his strategy. Adopting a generic anti-élite position, instead of looking for ways to tailor specific messages to the EU and to market operators, the two political forces have sent unqualified and alarming messages to both the EU and the markets. This has made Savona’s designation as Minister of Economy extremely problematic. After the leaked draft of a government plan foreseeing the possibility of a Euro-exit, and the final agreement on government programmes to cut taxes and raise public expenditures (with no budgetary covers), appointing the theoretician of a strategy on how to bring Italy out of the Eurozone and cut Italian public debt by 15-25% over a single weekend, could have triggered reactions from markets’ operators that are cannot be overestimated.
The (high) costs of time
If this interpretation is correct, what President Mattarella has done is buy time for the Italian political system to reorganise, but at a very high price. These costs include:
- Prolonging the uncertainty among market operators, exposing Italian public debt to enormous pressure from the markets;
- Frustrating a government that would have won a democratic majority in parliament, and thus strengthening nationalist drivers within Italian politics; and
- Polarising the Italian electorate, presenting the risk of Italy running towards snap elections that could be seen as a de facto referendum on Italian participation in the Eurozone.
Whereas the Mattarella’s decision has clearly put huge pressure on both Italy and its international and European partners, the greater pressure had been on Lega leader Matteo Salvini, currently representing the key figure for Italian stability. During the last month, the right-wing political leader has in fact been able to subject the coalition with the Five Star Movement, busting its electoral consensus, then presenting Paolo Savona as the only possible option for the Ministry of Economy. The president’s move has thus put Salvini in the corner, forcing him to take the responsibility (and political cost) for choosing between forming a more moderate government with the Five Star Movement or moving towards new elections. Whereas Salvini’s ambiguities on Italy belonging to the Eurozone has been the key of his recent popularity, holding an explicit anti-euro position could have alienated him from his traditional constituency, largely represented by the rich Italian industrial north, which does not have the real intention to exit the Eurozone. Thus, in the end Salvini was forced to decide if running a new electoral campaign along a more traditional left-right wing axes or forming a new government with the Five Star Movement, which was offering more guarantees to Italy’s international partners. In any case, Mattarella’s move would have stopped a dangerous and uncontrolled driver that was leading the country towards a head-on collision with the EU and financial markets.
Despite all of this, and the uncertain future of the new Italian government and its role in Europe, Italy’s recent political events should be yet another wakeup call for Europe. Unlike the Italian political crisis, the fundamental problem posed by Professor Savona on how to establish a more effective negotiation process among diverging EU countries still remains. If European leaders do not find a solution to this issue, it should come as no surprise if the the building blocks of the European integration project will be increasingly subjected to national political cycles – where any accidents, no matter how prosaic, could substantially compromise what once was believed to be irreversible.
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