he crisis afflicting Italy and Europe is incomprehensible to many Italians. It is a weird swirl of accosting numbers and percentages similar to the estimations made by the nuclear age arithmeticians who connected megatons to death tolls and established game theory tables grading mass destruction. Yet what people really feared wasn’t the death toll but the idea of incineration.
The European meltdown is in fact a conflict in disguise, albeit triggered by the defeated, Greece and Italy, whose broken economies have generated disdain and worry among the bigger states in part responsible for once encouraging them to spend freely, namely Germany and France.
The euro that rose to prominence thanks to deficit spending is now in turmoil for having allowed far too much of it. The result, in part, has been Italy’s unorthodox replacement of its populist prime minister, the controversial Silvio Berlusconi, with a former European Union commissioner, Mario Monti, and the concoction of an eleventh-hour austerity package, a kind of southern peace accord intended to make the country solvent and placate investors, the agents of the 21st-century monetary system and the new makes of national mood.
But the both the emergency and its draining daily drama still baffle many working and middle class Italians. Though always supportive of a united Europe and once hopeful about the euro, they now struggle to understand why they are being billed to repair arcane economic hydraulics. A year ago few could have foreseen the need to meddle dramatically with the sacrosanct taboos of retirement age and the pension system. But any quaintness has since vanished. Massively indebted Italy, assigned the role of Europe’s bellwether (and scapegoat), has promised to tax and trim in an effort to recover dissipated trillions. It’s a problematic effort in a nation that still refutes Anglo-Saxon follow-through.
Unlike the once and still skeptical UK, Italy jumped willingly into all things European. The 1958 Treaty of Rome laid the groundwork for the well-funded European Union, which once operational and equipped with its own currency appeared to shield Italy from the consequences of debt. Spurred by a global growth spurt that ended abruptly in 2008, Italian outlays consistently exceeded EU norms. The shrewd doctored projects to obtain EU funding, seen as easy money. Annual admonishment and cautions from Brussels fell on deaf ears.
Now, Italy is in essence under European house arrest pending rehabilitation, in the meantime force-fed Anglo-Saxon castor oil by an unelected economist tapped as a nation-savor.
The problem is that Italy rarely swallows bad-tasting medicine, particularly if seemingly prescribed by doctors with foreign accents. Regional and personal priorities have always come ahead of national civics, reflecting the country’s history of princes and republics. Postponement exasperates enforcement. Conclusion is rare. The Italian statistical institute CENSIS recently described Italy’s social climate as one in which “the primacy of the ‘me’ prevails, and with it a conviction that laws, even written laws, are relative.”
Even the most dutiful Italian taxpayer concedes that scamming is a way of life, with various kinds of evasion culturally embedded and necessary to a huge and largely undocumented economy that keeps the common man afloat. Skeptics of higher taxes insist that they only boost that underground by forcing both the desperate (including family men) and the unscrupulous (including would-be serious businesses) to find more creative ways to bypass the law. The “responsibility” rift is often described along north-south lines, with the north preferring to scorn the south’s looseness, as if Oregon took Mississippi to task, with neither side fully acknowledging the other as part of the same country.
Paradoxically, the existence of a parallel economy (into which all Italians eventually dip) at once reassures and disgraces. On the one hand it facilitates work and cash flow; on the other it curries duplicity. The Monti government’s decision to put a cap on cash transactions is the latest if unconvincing effort to rein in untaxed commerce.
Making matters worse, the country is already mired in a recession that extends deep into the middle class. An already weak economy has been slowed further by months of alarmism, bringing nonessential spending to a standstill. Lavish dining has yielded to pizza. Impulse buying is down, much to the dismay of major exporters, including China. Italian businesses that depend on manual labor persist in using off-the-book help, since local labor costs are unsustainable. Though the reinstatement of property taxes on first homes, eliminated by the previous government, will bring in billions, it will also add between €200 and €5,000 to annual budgets. Since less affluent homes contain as many as a half dozen members, including parents and children, even grandchildren, the new demands are likely to further diminish cash flow and intensify domestic squabbles, and with it depression. The accretion of bad news is destined to further challenge a country’s whose urban well-being is already at risk.
Italy’s economy already suffers from years of abuse and self-indulgence. Postwar unions applying “never again” logic to labor legislation following decades of near-slave labor conditions created by baronial bosses. No-firing clauses were built into a social contract that also called for health care and generous pensions. Semi-retirees and part-time state employees supplemented their income by taking under radar jobs, a pattern that persists.
Financial imbalances and state debt under the old lire system were “corrected” internally as part of an unofficial system of checks and balances. While playing by its own rules, Italy seemed set for life, briefly eclipsing the UK in economic output in the 1980s. Settling into affluence, unions even abdicated a hard-won “wage escalator” that pegged pay to inflation.
But the end of the 1980s also saw the start of the so-called Mani Puliti (Clean Hands) probe, which focused on political corruption. By mid-1992, magistrates exposed a country built on bribery and embezzlement. The country’s former prime minister, Bettino Craxi, a popular Socialist considered the architect of the 1980s boom, was arrested and eventually fled to Tunisia, where he died in exile.
The probe had major ramifications. Politics was leaderless and the economy struggled. The lira was devalued. These embarrassments laid the groundwork for Forza Italia, a populist movement that co-opted the void left by the Christian Democratic and Socialist parties, both obliterated by Clean Hands. Led by the luminously smiling Berlusconi, a randy, self-made millionaire and former entertainer, Forza Italia surged to the forefront of Italian politics in 1994. Many saw Berlusconi as ideally suited to erase two years of opaque management (economist Giuliano Amato and banker Carlo Azeglio Ciampi, figures in the Monti vein, ran Italy between 1992 and 1994.)
But the substantive change remained elusive. Whether ruled by the center-right or center-left (which ran the country between 1995 and 2001), Italy resisted the housecleaning. The Northern League, a demagogic party that accused the Rome government of thievery and advocated northern secession, repeatedly blocked efforts at pension reform. Efforts to institute direct voting, streamline bureaucracy, and revise the organization of the country’s party system also faltered. Even today, party slates still prevail over individuals, making it hard for dynamic figures to emerge. (Ironically, the euro crisis has shoved electoral reform, a hot subject in recent years, to the back burner.)
Workplace rules were also untouched in the post-Clean Hands era, with dismissals still virtually impossible. The cost of the social welfare system forced tax burdened Italian businesses to look abroad for help. Domestic hiring dwindled as companies worried about the cost of full-time employees. Turnover all but ended. The employed-for-life paid little heed to the fate of their sons and daughters, destined to come of working age while their parents still had jobs. Italy’s youth unemployment rate is roughly 30 percent.
Women were not incorporated into the mainstream workplace (and still are not) while waves of post-Communist era arrivals inflated the underground economy, intensifying resentment toward immigrants. The Northern League made xenophobia into a battle cry and slowly increased its political clout. Its leader, Umberto Bossi, lambasted Rome daily until adopting a “join ’em…” philosophy that would see his party revel in the perks of national power.
Lately, Bossi’s party has been the only one to denounce the austerity plan, portraying Monti’s ascent as a kind of Rome-centric coup d’etat carried out under false pretenses. His party has repeatedly heckled Monti in parliament (one such protest led former Berlusconi ally Gianfranco Fini to say, “Whistling is for sheepherders, not lawmakers,” a reminder the class warfare that simmers beneath all Italian debate.)
A conspiratorial view persists in part because domestic and European calls for Berlusconi’s ouster insisted that he alone was responsible for sullying Italy’s national and financial reputation and that the turmoil would ease if he left. It did not. Only the unblemished character of the country’s president, Giorgio Napolitano, a former Communist (the country’s labor party for three decades), tempered debate over whether the unelected Monti had the right to impose emergency taxes, seen by some as at an act carried out at the behest of foreign powers, a nonmilitary “occupation.”
Ask most Italians what a “spread” is or what a AAA-rating represents and their answers vary depending on how closely they follow mass media, which in recent months has sworn by an alarming if arcane glossary of banking terms usually reserved for MBA students. Italy has the lowest population of college graduates in Europe, less than 15 percent, or half the number in Germany and France. Postgraduate figures are even lower. Moreover, four out of 10 Italians have never used the web, arguably the 21st-century’s most effective amateur teaching tool. Monti’s end-of-the-world admonishments, while earnest, remain slightly surreal.
The Byzantine nature of EU economics, like that of Italian bureaucracy, is an open invitation to non-experts to imagine plots hatched by scheming college graduates or Catholic Masons trying to dupe those who pay their bills. Since law is translated to the citizenry through notary publics and accountants, Napoleonic-era bureaucratic facilitators, those asked to fall into line can feel estranged from what’s being asked of them.
Giuseppe De Rita, the sociologist who heads CENSIS, says the euro crisis fallout has added yet another layer to Italy’s deep inferiority complex. The constant talk of markets has “increased a feeling of not mattering, and of personal insignificance in general,” he wrote recently. Seeing the future in positive terms has lost any naturalness. Immigrants are now more sanguine than Italians.
This “future shock,” a phrase coined by Alvin Toffler in 1970, is fundamentally tied to dismal state of the country’s 16-to-30 olds. Italy is the world’s second-oldest country after Japan. It has a static marketplace in which merit and labor are unrelated. Those with jobs don’t relinquish them, nor are they amenable to “natural” generational shifts, except perhaps in family businesses where transference has no effect on in-house power. Those forced from their jobs by company collapses are covered by cassa integrazione, the state redundancy fund, another backstopping mechanism. Just reaching pension age is considered an accomplishment since it represents a financial sanctuary for those unable or unwilling to dream bigger dreams or convinced that such dreams exist only for well-connected insiders. Traditionally, Italians work through retirement age (Monti is moving it from 60 to 62) and then reap state-financed stability that can be supplemented through secondary work. This explains the instinctive circle-the-wagons response to pension reform.
Nor is the age of Italy’s ruling class a hopeful indicator among those seeking to establish themselves. Napolitano, the president, is 86; Berlusconi 75; Bossi 70; and Monti 68. Fiat chairman Sergio Marchionne is “only” 59, but he honed his business reputation in Canada and Switzerland. Aside from soccer coaches, there is no major national figure of relevance under age 50.
This downbeat landscape gives Monti’s austerity plan the flavor of an American New Deal in reverse, siphoning from existing income while avoiding radical overhauls. A wealth tax was discussed but tabled. Though the Monti plan will offer breaks and perks to companies that hire youth, recession makes all hiring unappealing. Many companies will forgo incentives rather than taking on the near-parental burdens of new fulltime employees. Moreover, promised incentives can often take months, if not years, to kick in, making a mockery of the encouragement process.
Then there’s tax evasion, a shrewdness that has long cut across all social classes. Lax enforcement is damaging, as the perception that the educated (still called “doctors” or “professors”) will always beat the law. Italian taxpaying has never been effectively linked to citizenship. Cheating may be both dishonest and dishonorable, but bending the odds in your favor is not, a distinction that looms large in daily transactions and school classrooms.
The issue of schooling is particularly important since the teachers of 2011 no longer possess the optimism of the generation that taught Italy’s postwar class. Cutbacks have engendered disillusionment, a mood easily transmitted to students who in city centers often face overcrowded classrooms and lax discipline well into their university years. Students see chaos as the norm, dovetailing with parental cynicism to torpedo optimism.
With the state is perceived as a “taker,” many Italians coalesce into communities of the griping, their response to state shortcomings measured through informal, community-oriented solutions to problems, including the ad hoc creation of daycare centers. Extreme resistance is measurable in organized crime, which maintains its geographical markers. Naples, for example, is still seen as an underworld sink; its government and business selectively corrupt, while Milan is its antithesis, financial hub influenced by Catholic-Teutonic values and host to the country’s leading economics university, which Monti once ran.
Though neither characterization is accurate, Naples is Europe’s preferred lens when it comes to measuring the Italy of cliché. The caricature is that of a city that seemingly exists to spite rigor and allows mobsters and their administrative lackeys to determine the fate of garbage.
Yet supra-legal responses to seemingly insurmountable problems are part and parcel of Italy’s ability to adapt and endure. Unconsciously at least, many Italians are convinced that cleverness and self-reliance are badges of honor, a kind of creative citizenship that ironically emerges from anarchist roots and pre-unification ingenuity rooted in an environment that put dog-eat-dog resolutions ahead of civility. Many forget Italian affluence is only half-a-century old and leaves out whole provinces. For some, earning and keeping money is a matter of survival. It’s a hard habit to break.
In this context, the euro once represented a promised land. Italy, glad for its inclusion, hoped to better itself. The good cheer was soon tempered by an understanding that a common currency did not mean an equal one. At first, mystified Italians equated one euro to 1,000 old lire, which seemed to simplify everything — until users realized one euro was actually worth twice that. By then, the Italian price structure had capsized. An espresso that once cost 1,000 lire suddenly cost one euro, or double. It took months before Italians understood the full consequences of the change and its effect on the cost of living.
Though Italy has always been susceptible to frenzy, the collision of Latin exaggeration with American-style breaking news has exacerbated the tendency. The euro crisis’ relentless reference to wild numbers and Draconian cuts has led some taxpaying Italians to see themselves as victims of Berlin’s whims in cahoots with a leadership class, or caste, that preaches nation-saving while hiding billions outside the country. The perception isn’t helped by the reluctance of national and regional government to make its own sacrifices, backing away from the massive entitlement system it has acquired in the seven decades since World War II.
Monti publicly announced he would forgo his prime minister salary, but symbolism pales before the pork barrel waste associated with state sinecures, whose benefits are corporate-level. The president of state television RAI nets more than €700,000 annually, with high-level management averaging €400,000 (talk show host Bruno Vespa, an independent contractor, earns €1.2 million). On average, lawmakers are thought to take home between €19,000 and €37,000 a month, with a €5,000 housing allowance. Support staff average €131,000 annually and can retire early. More telling, fulltime parliamentary wages rose about 15 percent between 2009 and 2010, when the country was still suffering the effects of the global economic downturn.
These figures represent amalgams of data gleaned from judicial wiretapping, occasional public disclosure, and partial reports issued by the country’s statistical institute, ISTAT. Freedom of information has never been an Italian strength. By contrast, Italy’s median annual wage was €14,700 in 2010, with more than 2.5 million Italians unemployed or on the redundancy dole.
The imbalances don’t end in Rome. Regional leaders in both north and south earn disproportionately high wages — an average of well more than €120,000 annually in Lombardy, home of the Northern Leagure — and receive an array of perks (including free business travel). The highly-publicized information merely reinforces the “state as taker” logic and makes pension downsizing and new taxes seem exasperating if not enraging despite their nation-saving label, subverting the compelling need to reduce national spending. To some, the national rescue is one-sided, targeting the middle class alone.
Only once in recent history, during the Clean Hands period, did Italy actually punish its abusive leadership. The ballot box elimination of two parties seemed at the time to herald a new dawn. Berlusconi, the first new dawn leader, was a one-man Latin Tea Party, a building and media tycoon who promised to champion “freedom, the individual, family, enterprise, Italian tradition, Christian tradition and love for weaker people,” free enterprise radicalism. Italians, he shouted, should be freed from bureaucratic oppressors, whether judges or tax-happy politicians.
Although voting numbers have dropped off in recent decades, Italians like elections. They’re galvanized by political campaigns, seeing them as cathartic. Though they’ve so far been accepting of Monti’s intercession, billed as a providential effort to repair a diminished country, they won’t accept his unelected status indefinitely. He will have to select a party or leave the bus. His future, as well as his legacy, depends largely on whether Europe regains its equilibrium, in which case Italy will be seen as having helped with that effort. Anything short of a retreat from alarmism to stability will open the door wide to partisan figures better trained in persuading the common man, who soon enough will grow restless with the tinkering of Europe-minded economists, demanding me-first relief.
By which time a new populist hawker may find a corner to work.
And the cradle will rock.