Italy’s chance to buck the Brexit-Trump trend

The politician who ought to be most immune to the populist rage sweeping the world’s democracies should be Italy’s Prime Minister Matteo Renzi. A former mayor who won election in Florence at the age of 29 as the radical alternative to an establishment candidate, Renzi has solid populist credentials.
Moreover, Italians have already had their Donald Trump. Billionaire businessman Silvio Berlusconi was prime minister for nine years and a political force for some two decades; his legacy was one of countless broken promises of reform, continuous scandal and widespread international derision. And after more than 60 postwar governments, Italians also know the meaning of instability.
And yet, perhaps none of that matters. On Dec. 4, when Italians vote in a referendum Renzi has pitched as make-or-break for his government, he is in danger of being knocked away by the same electoral wrecking ball that crushed the U.K.’s last government and Hillary Clinton’s presidential hopes.
Renzi doesn’t fit the mold of Clinton or British politicians who lost the argument over whether the U.K. should leave the European Union. Both were establishment forces that represented continuity and the status quo. Both, it might be said, represented the power centers of faded, or declining, empires, while their opponents promised measures to restore their country’s greatness. In Italy, ironically, a vote against the referendum is a vote not for change but for political instability and economic stagnation — two things Italians have plenty of experience with. Why Italians might reject logic and their own experience is partly down to bad timing and partly to Renzi’s own miscalculations in framing the issues and in personalizing the referendum (he has threatened to resign if he loses). It will raise further questions about the utility and wisdom of referendums to decide complex policy issues.
The questions Italians will decide might seem arcane compared to the U.K.’s in-or-out vote or America’s epic presidential campaign. But the issues are not only important in their own right (Renzi has, with justification, declared the country ungovernable without the institutional reform he’s seeking), the vote has become a proxy for the current government and its reformist
vision.
The biggest change is to the composition and role of the Italian Senate. The present system, designed to prevent another Mussolini, gives the two houses of parliament equal powers, which stymied law making as bills had to bounce back and forth between the two chambers, often taking years (even decades) to resolve. The reform would subordinate the Senate’s powers and make it an assembly of regional representatives who advise legislative change. The number of senators will be reduced to 100 from 315 and the chamber would comprised members of regional assemblies and mayors, with five presidential appointees. The reform would also abolish layers of government that create overlap between regional and central authorities.
Had Renzi stopped at those changes, his chances might now be better. But he threw in a change to the electoral law that makes it nearly impossible to dethrone a sitting prime minister for his five-year term and makes his own deputies dependent on him for re-election. That worries many Italians who are wary of Renzi’s less-than-collaborative approach to policy-making. Renzi must be ruing his poor luck. He fancies himself the populist reformer Italy needs, but voters are unhappy with a lot of things and want to signal their discontent.
The prime minister’s task has been made harder by Italy’s economic troubles: stagnating growth, an 11.4 percent unemployment rate, a banking sector plagued with non-performing loans and a debt-to-gross domestic product of 132 percent, well over double the European Union’s 60 percent limit. Nearly half of Italian youth are unemployed, and surveys, especially from the cities, show high levels of dissatisfaction. Italy’s middle class, like America’s, doesn’t feel it has reaped the benefits of globalization.
In the past, Italian governments papered over problems through devaluation and deficit spending. Neither is possible under the euro. Italy needs structural reform, but cannot have it under the current constitutional setup. Renzi’s bold attempt to reform Italy’s labor markets to make dismissal easier were thwarted by entrenched union interests and watered down, leaving him looking ineffective. To his critics, the constitutional reforms will not do much to end the fragmentation and cronyism in Italian
politics.
Renzi’s main competitor, Italy’s Five Star Movement — founded by the stand-up comedian, blogger and former Communist Beppe Grillo — has been steadily burnishing its governing credentials and warning voters that the reforms give Renzi too much power. It argues Italy should leave the euro and that its mainstream parties are corrupt and ineffective. Renzi never misses an opportunity to highlight Five Star’s lack of governing experience and its incoherent mix of policy proposals. But, it’s not clear that Italians are worried about things like experience or competence. Austerity has hurt, and they are looking for a way to vent their anger.
Renzi and his deputies have been zig-zagging the country to drum up support for the measure. “If the referendum doesn’t pass, over the next 30 years, whoever is prime minister will … be a slave to vetoes, blackmail and bureaucracy,” he warns voters. It’s not clear Italians are listening; the “no” vote was leading by 53 percent to 47 percent in October, according to the Euromedia poll. Renzi is a skilled campaigner who shouldn’t be underestimated, even now. But if the government falls and Italy’s political system remains unreformed, the safest assumption is a continuation of chaotic, cronyist politics; and Italy’s withdrawal from the euro (a demand of the Five Star Movement and an increasingly popular stance) becomes a real possibility. It’s unlikely the euro zone would survive that.
In the few weeks remaining, Italy’s government must convince voters somehow not to follow the example of Brexit and the U.S. election. The consequences if they reject that message could be as far-reaching as either of the votes we’ve seen so far this year.

— Bloomberg

Therese Raphael writes editorials on European politics and economics for Bloomberg View. She was editorial page editor of the Wall Street Journal Europe