Motherless Italy: Neither Dolce Vita, nor Berlusconi

Italy is intensively working on to get over the past Berlusconi era but is still a question what the post-Berlusconi years will be like. In the meantime, like 40 years ago, millions of young Italians are leaving the country to try their fortune – or at least to find a job – abroad. The majority of the people, who stay in the country, are completely disenchanted with the Berlusconi-type nationalist propaganda, says Fabiano Schivardi, who is Professor of Economics at LUISS Guido Carli University and Research Fellow at the research center of Banca d’Italia, the Einaudi Institute for Economics and Finance (EIEF).

He is expecting a consensus between the rival politicians and parties about how to make the country competitive again and how to put an end to the 20 years of economic stagnation.

At the same time, Italy is struck by public debt approaching 130 percent of the GDP, lack of economic growth, and political-governmental uncertainties. According to Schivardi, the situation is far from hopeless; people are calm and believe in democracy and the European Union, the companies are slowly but surely responding to global challenges and trying to become more international. The country is doing the same on a large scale. The stricter budgetary policies of the last years seem to succeed in keeping the deficit under control, even if the privatization of big national service providers is still very unpopular among many. A significant part of them are expected to be owned by foreign investors.

Zentai Péter: In my latest interview on alapblog.hu, Harlod James, Professor at Princeton University, expressed concern about the future of Italy in case of the dissolution of the European Union. Is there a real danger that Italy will split to North and South?

Fabiano Schivardi: Both economically and politically, as well as in terms of the state of development, there is a huge gap between the two parts of the country. Northern Italy is as industrialized as Austria, Germany, or the Netherlands. However, the Mezzogiorno (the Southern region) is a whole different story: it is much poorer, less developed, and the quality of public services is lower. Despite this, the popular support for the dissolution – or for the autonomy of the North – has declined recently. The Northern League Party, which advocated the independence of the North in its political program 7-8 years ago, has also weakened and lost most of its electoral strength.

So I think that it is highly unlikely North and South will divide. The political uncertainty is a more troubling issue. It worries both the Italians and the foreign investors. But to stick to the topic: when we look around Europe, the danger of separation threatens rather Spain than Italy: some of its regions can become independent from the federal state.

Whenever I meet Italians – and today, we can meet a lot of them in Germany, in the United States, and in Great-Britain as thousands of youths leave Italy to find a job – , they say that their homeland is a “casino” (a  brothel)…

This is pretty much the mood of Italians both abroad and at home. There are constant uncertainties in the country: the Berlusconi-era is over and it is unclear what is going to happen in the future. The media and political debates are concerned with Berlusconi – whether he had a good or bad impact on the country. It is time to move on from the current political situation and discuss the relevant issues of Italy. We should focus on improving the quality of life and cleaning up politics. Everyone knows that the Berlusconi-type nationalist centralization failed. After all, we will realize that Italy needs decentralization in order to become international and more competitive on the global markets.

Still, Berlusconi seems to have a lasting impact on people. In my opinion, this is an issue of great importance – and not just in Italy. Almost everywhere in the world, when there are big social problems, a significant part of the people start to hope for a real leader who believes in them, strengthens nationalism, and unites them, so that they can succeed as a nation.

Before the Second World War, Italy tried to unite under a charismatic leader. As we all know, fascism did not work out well. Most of the Italians know this. Today, after the Berlusconi-era, the majority of the people do not want to have a leader with too much power in the future. Of course, nobody doubts that leadership is important but we cannot hang on to a single person’s knowledge – in the case of Berlusconi, his business skills – to solve our problems. This would definitely result in failure. What people are waiting for is a wide political consensus between the rival political forces and reforms to reconstruct the economy. As long as we do not have these reforms, uncertainty remains: that is what the Italians regard as casino.

 

According to a recent editorial of the Financial Times, Italy is the weakest link of the Eurozone (based on its political, economic, and financial risk). Do you agree with that?

I would not say it is the weakest line. Of course, the extremely high public debt – reaching 130 percent of the GDP -, the lack of economic growth and the high political risk might be shocking. However, in the last year, the macro data has significantly improved: the public deficit has been put under control and the pension system has been deeply reformed. The political uncertainty could also be solved, if the dominant parties and leaders agreed on reforms that serve the revival and reconstruction of the economy. This might be painful but necessary.

 

Is it a political mistake that Italy fell behind and performed poorly, compared to the earlier achievements?

In my opinion, it is not a political mistake. True that Italy did not respond well to the global challenges of the past two decades and politicians were not able to reverse this trend. From the perspective of economic development, it was irrelevant that prime ministers changed every six months. In fact, the same political elite was on power: the Christian Democrats and their allies. This might look like a very unstable situation but in practice, it was very stable. However, it became more complex now, like the world around us. Italy has been stagnating for almost twenty years. Unlike the other Southern European countries, such as Spain, Italy was not able to grow a lot. But during the crisis, its economy did not shrink as much as those of the other Southern European countries. So the turn was not very sharp. (Considering the GDP, these differences are not so big, except for Greece – ed.)

The stagnation can be explained by the productive structure of Italy. In the 1970s and 1980s, the economy was mostly based on competitive, export-oriented small and medium enterprises. These firms were producing standardized goods at low cost and good quality, thus, they were able to remain very competitive for a long time. However, we failed to realize that the Chinese are taking an increasingly large share of our markets – in Italy, as well. They produced the goods we were best known for and we could not keep up with competition. The Chinese were able to adapt to globalization but we were not. Apart from a few firms, such as Fiat and Barilla, most of the Italian companies are still anchored to their previous model of production. What we need are bigger employment in larger firms and increasing competitiveness.

 

Are Italians blaming foreigners for the deepening problems? Is there an anti-globalization, maybe an anti-European Union sentiment in Italy?

Italy is still very European.  We have always highly approved of the European Union project. Our politicians, economists, and economists actively participated in the establishment of the EU with a wide public support.
The issue of the euro is another matter. There is a growing concern that the common currency does a lot of harm. Italy was not ready to have the same currency as Germany or the Netherlands with a completely different economic structure. As long as we had the lira, we could devaluate it but we have no influence on the euro. The strong currency is definitely harmful for us. However, it stimulates the restructuring of the production model.

 

This shift goes hand in hand with the sale of some Italian companies. I read more and more articles in the British and German press that there is a public outcry over the privatization of Italy’s “national treasures”. Is that true?

The Italian media pays very much attention to that some of the iconic Italian firms fall into foreigners’ hands. The public opinion was shocked when they heard that Telecom might be bought by the Spanish Telefonica. Most of the people do not understand this but the example of Alitalia, the national airline company, convinces more and more people that opposing a foreign investment can have high costs. In 2008, Air France wanted to merge with Alitalia but the right-wing government nationalized it in order to “save” it from foreign investors. Now, 5 years later, the company is still losing money and is on the verge of bankruptcy. We cannot see the way out of this situation because Air France is not willing to buy it anymore and Alitalia as a stand-alone company is not able to survive. So I do not see the problem with foreign ownership of national companies – I see it more as an opportunity.