26th Oct 2016


Italian politics: 1970s stuck on repeat

  • Rome: taxi scarcity is linked to 1970s-era politicking (Photo: Giampaolo Macorig)

The inevitable loop of Italian politics repeated again this month when former prime minister Silvio Berlusconi - fresh from a tax fraud conviction - pulled his party's support for the technocrat government of Mario Monti.

He announced his return to politics as the man who would save Italy from the "abyss".

Dear EUobserver reader

Subscribe now for unrestricted access to EUobserver.

Sign up for 30 days' free trial, no obligation. Full subscription only 15 € / month or 150 € / year.

  1. Unlimited access on desktop and mobile
  2. All premium articles, analysis, commentary and investigations
  3. EUobserver archives

EUobserver is the only independent news media covering EU affairs in Brussels and all 28 member states.

♡ We value your support.

If you already have an account click here to login.

Later, as Monti was tendering his resignation, Berlusconi back tracked and said he would support a Monti-led centre-right coalition. But the damage is done and whether the coalition will ever materialise is anybody's guess.

For Italians, this drama is just the latest episode in a 40-year-old melodrama which they have been stuck watching since the 1970s heyday of special interests.

Change is anathema to Italian politics, as a broken political culture left over from the Cold War continues to frame debate and hold down the economy.

Before the early 1990s, the Christian Democratic Party had been in government for nearly five decades.

For years, it gave huge concessions to special interests, especially unions and professional guilds, to keep the peace in parliament and to keep Italy's sizeable Communist Party from exploiting partisan disagreement to gain support.

These groups said "jump" and politicians asked "how high?"

The situation is not much different today.

Three institutions in particular, for which unions and guilds successfully lobbied, are as economically disastrous as they are resistant to reform.

First, there is Italy's employment law.

Article 18 of the statute of workers forbids firing an employee for performance reasons. Only cases of negligence can be grounds for dismissal.

The terminated worker can take his employer to court to either become reinstated or receive up to 14 months in severance payments - all the while keeping his employer on the hook for lost wages during the trial.

Firms with fewer than 15 employees have a choice between reinstating the underperforming worker or paying him off. This is a huge drag on hiring, as firms stay below the threshold that requires them to give out jobs for life.

In total, these regulations cover a whopping 87 percent of the private sector workforce, according to numbers from Datagiovani, an Italian statistical firm studying young people in Italy.

Those not covered, mainly the young, have no other option but to jump from job to job under temporary contracts because firms will not take the risk of hiring fully-fledged new employees.

The second problem is national collective bargaining.

Despite the vast difference in cost of living between the north and south, workers make the same base wages. This rigidity not only inhibits gains in workforce efficiency, but also makes it difficult to trim costs in times of recession without resorting to layoffs.

National collective bargaining agreements explicitly cover 70 percent of the Italian workforce, according to government statistics, and implicitly cover even more as they serve as guiding parameters for "fair wages" in sectors not covered by collective bargaining.

The third relic is "la casta" - Italy’s web of 28 service sector guilds.

These groups push government to erect barriers against competition through licensing schemes and industry standards, making Italy's service sector the most regulated in the developed world, according to the OECD club of industrialised countries.

One of the most glaring examples is the scarcity of taxis in Italy's capital.

Rome has less than a third of taxis per resident compared to London or Paris, because the Italian taxi guild lobbies and strikes to keep taxi licenses to a minimum and competition non-existent.

The real tragedy is there is not much hope for change.

Faces in politics come and go, but policies are stuck in a time warp.

The center-left candidate for spring elections, Pierluigi Bersani, has no vision for substantial changes in his platitude-laden platform. He opposed Article 18 reform last spring and is beholden to unions, which comprise a large portion of his party's support.

Berlusconi does not support meaningful reform either, or else he would have done it before the financial markets forced him out of office last autumn.

Comedian Beppe Grillo's populist Five Star Movement - even as it support mushrooms to 19 percent - is a bastion of economic illiteracy.

It wants to ban stock options, among other economically useful activities.

The sad reality is that the only force for liberal reforms and for modernising Italian politics is the anti-politician Monti, whose future in politics is highly uncertain at this point.

Although his record has been lackluster, he at least showed some courage to take on entrenched interests when he pursued service sector liberalisation and Article 18 reform earlier this year.

The Cold War has been over for more than 20 years, but Italian politics is stuck in the past.

Until Italian leaders gain the courage to take on the special interests that have gorged at the public trough for decades, the best thing they can do is stay as far away from government as possible.

Matthew Melchiorre is the Warren T. Brookes journalism fellow at the US-based Competitive Enterprise Institute


Europe ready to tackle Greek debt relief

The Greek government has built and broadened alliances in EU institutions and member-states that acknowledge the need to restructure the debt and deliver another economic model for the eurozone.

Stakeholders' Highlights

  1. EFADraft Bill for a 2nd Scottish Independence Referendum
  2. UNICEFCalls on European Council to Address Plight of Refugee and Migrant Children
  3. ECTAJoin us on 9-10 November in Brussels and Discover the new EU Digital Landscape
  4. Access NowCan you Hear me now? Verizon’s Opportunity to Stand for Global Users
  5. Belgrade Security ForumMeaningful Dialogue Missing Not Only in the Balkans, but Throughout Europe
  6. EuropecheEU Fishing Sector Celebrates Sustainably Sourced Seafood in EU Parliament
  7. World VisionWomen and Girls Urge EU Leadership to Help end Gender-based Violence
  8. Dialogue PlatformIs Jihadism Blind Spot of Western Intellectuals ? Wednesday 26 October
  9. Belgrade Security ForumGet the Latest News and Updates on the Belgrade Security Forum @BelSecForum
  10. Crowdsourcing Week EuropeMaster Crowdsourcing, Crowdfunding and Innovation! Conference 21 November - 10% Discount Code CSWEU16
  11. EJCEU Parliament's Roadmap for Relations with Iran a Massive Missed Opportunity
  12. Nordic Council of MinistersFish Skin on Bare Skin: Turning Fish Waste into Sustainable Fashion

Stakeholders' Highlights

  1. CEDECOpportunities From the Creation of Synergies at Local Level in the Energy Transition
  2. ACCAFinTech Boom Needs Strong Guidance to Navigate Regulatory Hurdles
  3. Counter BalanceWhy the Investment Plan for Europe Does not Drive the Sustainable Energy Transition
  4. Nordic Council of MinistersThe Nordic Region Seeks to Make Its Voice Heard in the World
  5. Taipei EU OfficeCountries Voice Support for Taiwan's Participation in ICAO
  6. GoogleDid You Know Europe's Largest Dinosaur Gallery Is in Brussels? Check It Out Now
  7. IPHRHuman Rights in Uzbekistan After Karimov - Joint Statement
  8. CISPECloud Infrastructure Providers Unveil Data Protection Code of Conduct
  9. EFAMessages of Hope From the Basque Country and Galicia
  10. Access NowDigital Rights Heroes & Villains. Who Protects Your Rights, Who Wants to Take Them Away