Italy's dilemma: revival or default

Italy’s impossible current political situation is the result of five separate paradoxes, one for each major party. The PD (Partito Democratico, or Democratic Party) has achieved a Pyrrhic victory. The mood of the party’s secretary, its leaders, and its campaigners was always one of defeat. A grand opportunity has been missed, a wealth of favorable circumstances thrown to the wind with a campaign that was late out of the starting gate, and tired and incomprehensible as it went on. Technically the PD was the overall victor, but with slim margins that will be virtually useless, its secretary has presided over a debacle that has involved its entire political line.
The left has emerged from the elections significantly reduced by a difficult and futile victory. Berlusconi, on the other hand, came out with an even score that felt more like a win, missing all-out victory by a hair. Although his party’s electoral strength was greatly diminished in this election, the PD’s loss of votes to the Beppe Grillo’s M5S – the real cornerstone of this election – allowed Berlusconi’s PDL (Popolo della Libertà, or People of Liberty) to achieve an improbable percentage. He has maintained his presence and gained at the very least the power to influence whatever government is eventually formed.
The third paradox is Beppe Grillo. He is the undisputed winner of this election, although he has no intention of actually governing. His showing was nothing short of spectacular: a freshman at the ballot, with little funding or media support, by ignoring tradition his party was able to bring in one quarter of the vote. He has channeled the protests and aspirations of those who are unable to find work, are tired of the politics of privilege, and who find themselves most comfortable with communication over the web.
Failing to understand the state of unrest that is rolling across the country – to Grillo’s advantage – was the fatal mistake of the established parties. But now Grillo will have to make something out of what he has created. He cannot keep saying no, because now he will be held accountable for his actions. If the spread continues to rise because of the lack of a cohesive government, Grillo will hurt his movement and will likely begin to lose followers.
The Lega Nord (Northern League) has hit rock bottom, but in doing so has reached the goal it had set for itself: conquering Lombardy, Italy’s wealthiest region. It is ironic that as the party evaporates, it also controls the three most important regions of northern Italy, the economic heart of the country.
As for Mario Monti, he has learned that the support of foreign governments does not translate into votes at home. The Centrist showing was mediocre at best, a passing cloud that will leave no trace of itself behind, although the experience of a technical government, separate from the political parties, may once again return to the field. The situation is very complex, with interposed and reciprocal vetoes. The crux of the matter lies in the hands of the President of the Republic, but he lacks the power to dissolve the houses of Parliament. He will need to let the situation settle, and the find out if there is a responsible way forward for the political forces- and if that road can be traveled. The divisions are nevertheless deep and fast, and any agreement will be seen as just divvying up the seats. The benefits for the anti-politician Beppe Grillo would be immediate.
All outcomes are still possible, including the prospect of new elections in June, an easy option to an otherwise unsolvable situation. Italy’s parliamentary uncertainty could bring back fears of a new crisis, but it should also be a cause for reflection on a related aspect: that restrictive measures are no longer viable. The Italian electorate has rejected them, choosing two formations – those of Grillo and Berlusconi – that are both either lukewarm or contrary to the constraints being handed down from Brussels and Frankfurt.
The house of the Euro has undoubtedly lost structural integrity, and fears of a collapse have returned, flagged by Moody’s, even though its evaluation seems predictable, an application of formulas and ratios. The markets have proceeded with caution following the election, and the Milan exchange rallied back after the initial downturn. The BoT auctions went ahead without a disproportionate spread, and the Euro-Dollar exchange rate remains around 1.3. So there is some justified apprehension, but not widespread panic.
There is a strong feeling of clinging to Draghi’s declaration that he will save the Euro “at all costs.” But the markets are not always driven by rationality. Confidence is a rare and volatile commodity, and so any extension of the Italian crisis will inevitably be seen as a hopeless agony and a return of the country’s financial ghosts, held at bay until now by the prestige of Napolitano, Draghi, and Monti, the latter now having been penalized at the urns. But in the eyes of investors both domestic and international, the belief that the country may not have the strength left to correct its inexorable course towards default, the kind from which no country has ever been able to recover, from Equador to Argentina, and only after painful revolutions in China and Russia, is making headway.
In the end, the Italian crisis is one of competitiveness weighed down by a bloated bureaucracy and slowed by an aging population that has lost its sense and motivation for hard work. The spread is just a symptom of the disease, but it is more serious than just a common cold; it may just be the terminal malaise that strikes declining societies that are unable to adapt to the new world order, choosing instead to stomp their feet and lay the blame on politicians, judges, tax evaders, or Angela Merkel, without realizing that the illness is inside every one of us and it has an ancient name: loss of the will to work hard, make sacrifices, and the dignity of loving oneself for being Italian.