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Home Business Italy’s Question Is Ours, Too: Who Will Spend the Covid Cash?

Italy’s Question Is Ours, Too: Who Will Spend the Covid Cash?


Former Italian Prime Minister Giuseppe Conte in his office in Rome, Jan. 26.



Photo:

filippo attili/chigi palace pres/Shutterstock

You’ve got to hand it to the Italians. Rome is better than anyone at creating political crises that hold a mirror up to everyone else. Witness the latest kerfuffle over the latest collapse of the latest Italian government.

For anyone struggling to keep up: Prime Minister

Giuseppe Conte

resigned this week after his governing coalition fell apart this month. Whether he’ll patch together a new government or call a snap election is anyone’s guess, although a wager on the former seems smart. Meanwhile the eurozone’s third-largest economy—and an early epicenter of the Covid-19 pandemic—limps along without discernible leadership.

Read More Political Economics

The proximate cause for this turn is a feud between Mr. Conte and his predecessor

Matteo Renzi

(now leading his own microparty) over how to spend some €209 billion in European Union coronavirus aid. Mr. Conte mostly wants to seize personal control of the disbursement of those funds, via a committee of technocrats he handpicks to oversee spending. Mr. Renzi wants Parliament to get a say in the coming bonanza, and who can blame him? Throwing money at constituents is at the heart of politics, and it’s terribly unfair of Mr. Conte to deprive his colleagues of the opportunity to do that for which they were created.

Yet there are deeper forces at work in Rome. Messrs. Conte and Renzi are fighting a battle over who can lay claim to the political legitimacy to spend so much money—while squeezing out the one politician who actually has it.

That would be

Matteo Salvini,

leader of the right-wing League party. The last time Italians elected a Parliament, in 2018, Mr. Salvini’s League and its coalition of smaller parties was the plurality vote-getter with around 37% of the total. He went on to become the real brains of the operation in a right-left coalition government with the second-place 5 Star Movement, fronted by Mr. Conte as a figurehead prime minister.

Italian politics since then has become a matter of everyone else trying as hard as possible to keep Mr. Salvini out of power despite that election result. His and his party’s stint in government lasted all of 15 months before his ostensible partners in the 5 Star Movement joined with Mr. Renzi’s old party, the Democrats, to oust Mr. Salvini and form their own coalition—the government that now is collapsing. One reason to bet against an early election to resolve this crisis is that no one will want to risk letting the League bolster its position in Parliament, especially since a constitutional reform means the next election will return a smaller Parliament than today’s unwieldy beast of 951 seats across two chambers.

No wonder Rome has become so chaotic. Italian politicians keep trying to cobble together coalitions of election losers, and such governments are inherently unstable. The temptation to give the kaleidoscope another spin always proves too great for someone—especially when the opportunity to channel an incoming tsunami of cash is at stake. Whatever government emerges from the current fiasco won’t mark a resolution of this political crisis so much as the setup for the next one. Any new coalition will be too tenuous and the temptations of €209 billion in spending too great.

There’s a warning here for the rest of us.

In an era of mega Covid stimulus, all eyes are on the dollar, euro, pound or yen amounts involved. Too few eyes are on the important question of who will decide how it’s all spent. Yet the unprecedented government spending, unprecedented debt and unprecedented monetary policies that facilitate it all place new demands on politicians. They will have to judge among competing policy and social priorities at a time of historic economic strain. This is the stuff of which crises of political legitimacy are made.

Italy’s crisis is extreme, but don’t imagine it will be the only example. Germany’s sclerotic left-right grand coalition will attempt to make stimulus decisions on its way out the door ahead of September elections.

Emmanuel Macron

in France will try to revive his political fortunes after his 2017 electoral mandate was dented by yellow-vest protests.

The bright spot for now is the U.S., where voters have returned a new government with debates about stimulus spending very much on the table. Yet even here, expect trouble ahead as Democrats surrender to the temptation to overinterpret the limited mandate they won in Congress, let alone President Biden’s mandate, which really amounts to “don’t be

Donald Trump.

” Similar circumstances brought us the tea party in 2009, and all the political tumult that followed.

For better or worse, Keynesian economists have made their case for astronomical stimulus blowouts. Good luck to the politicians left trying to spend it all.

Wonder Land: The Covid vaccination mess calls to mind the catastrophic rollout of ObamaCare and the Obama-Biden response to H1N1. Image: Jim Watson/AFP via Getty Images

Copyright ©2020 Dow Jones & Company, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8

Appeared in the January 29, 2021, print edition.



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