Wishing on Europe

The atypical coalition governing Italy, the union of sworn enemies (Partito Democratico and Popolo della Libertà), is bound to last for several months yet due to a compelling political reorganization in both parties.

The FT flashed a warning last week with title “Letta’s lethargy” to mean that the present six-party coalition sworn in April 2013 is showing little vitality. The statement is premature, however, as a decree has just been signed by Mr Letta listing 80 items to …start the ball rolling; it includes a large number of little dispositions to streamline bureaucracy and the significant suspension of the ‘abode tax’ plus the placement in abeyance of the VAT rise from 21 to 22%. The last two items weigh € 8 bn, a sum to be raised within three months or the decree will not be converted into a law. True, the house-math would suggest that you first find the money to then allocate resources but Mr. Berlusconi (PDL) was firm in campaigning that his support to this government relies on scrapping the house-tax.

Economics would suggest that, in time of crisis, containing the VAT rate would yield more benefit (to Industry and household) rather than scrapping the house-tax, considering that Mr Saccomanni, Finance Minister, can dispose of € 4-5 bn at most; it appears that political manoeuvring in Italy comes in prominence rather than sound Economics! Will be able Italy to maintain the 3% deficit target promised to Brussels?

Mr Berlusconi (PDL) has lost 6 million votes in the last political election and has not won a single mayor in the administrative elections held two weeks ago; it is a single-person party and it is dubious that the strong personality of the leader can put up with a decent successor. A way to the future can only be a separate party with young managers, led by a “credible alternative” living its infancy and, possibly, the blessing of the EPP (European People Party).

The improbable agitation inside the Partito Democratico, who won most mayors in the recent elections, is caused by M5S (Movimento 5 Stelle) that saw a resounding defeat in the same administrative elections; recriminations within the party are causing rumours of scission in a considerable number of members. Should this prove true in the following days then the diaspora could easily join the PD given their ideological proximity. This, in turn, would alter the government’s balance and consequential renewed ambitions.

Mr Berlusconi masters communication strategy and presents weak underlings; Partito Democratico lacks communication skill and inexplicably holds promising leaders on-the-bench.

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