Italy, between default and decline

Mario Monti’s therapy for the country’s economic woes was primarily based on tax hikes. Enrico Letta replaced Monti at the helm of the Italian government after having barely edged out Berlusconi in 2013. Enrico was forced to share the limelight, if not the leadership with Mr. Berlusconi’s “dauphin”, Angelino Alfano on a ticket of less austerity and more growth, a “grosse koalition” Italian-style. Ironically, all of today’s leaders at the helm of Italy are new and unelected. All, that is, but Mr. Alfano (but including Mr. Renzi) Italy’s debonair, young Premier. Yet, all of these leaders have done little to address the real issues and stimulate Italy’s comatose economy, with the possible exception, that is, of Mr. Renzi.

The problem of default has been postponed thanks to the systematic gouging of the Italian taxpayer. Default, however, was a real risk even before the sovereign debt crisis ever began. If there is anything structural about this country’s economic woes it is precisely the enormity of a national debt that has broken the € 2 trillion barrier and continues to grow. The country’s other major problem is political: directly connected with the country’s political system and decision-making process, it has little or nothing to do with the current economic crisis, however triggered by the American financial crisis of 2007. The nexus between the first and the second problem, however, cannot be underestimated. All have contributed to stymie the political system, which the Italians gave themselves following their defeat in the Second World War.

The “system” devised by Italy’s founding fathers during the years immediately following the War has failed because of it’s inability to adapt to the changing socio-political circumstances within and without the country since the fall of the Berlin Wall. The reasons for such failure are complex and have haunted Italians long before the advent of the present economic crisis. Some of these reasons are peculiar to Italy and its vertically organized, unitary system of government. Others stem from the country’s (civil law) legal system, singular even in comparison to other civil law jurisdictions.

Italy is a parliamentary democracy. And as conceived by Italy’s founding fathers, parliament was to have been the corner stone of a system of government based upon a strong legislative branch. In Italy,  the people are said to be sovereign, which sovereignty they excercise through their representatives in the Parliament subject to and in accordante with the Constitution. The legislative branch was to be “checked and balanced” by the other two branches of “government” (which Italians more commonly refer to as the, “stato”). But in the Italian model, while the Executive Branch is a collective and collegiate organ structurally weakened because of its dependency on Parliament, the Judiciary was spun-off into an independent, unelected bureaucracy answering only unto itself.

Proportional representation and nominal thresholds for winning seats, virtually guaranteed a place in parliament to even the smallest political party, creating a “Tower of Babel” effect, which soon neutralized parliament, weakening its capacity to legislate and mediate the country’s diverse political interests. The executive branch, institutionally weak and collegial, soon found itself hostage of the parties that controlled the MPs sitting in parliament. A “Presidente del Consiglio dei Ministri” was chosen by the President of Italy from among the leader(s) of the party having the “relevant majority” in parliament. Under the “old” system (i.e. before Berlusconi ushered in the so-called “second Republic” in 1994), Italian governments rarely lasted for more than 12 consecutive months, more often than not, falling prey to so-called “extra-parliamentary” crises that would limit the government’s effectiveness and duration, conveniently sparing MPs from having to reveal to Italian voters in an open vote of no confidence how they really stood vis-à-vis their government. And so the “wise-guy” mentality, was allowed to take root in the parliament.

With an often deadlocked parliament and an institutionally weak executive the only power remaining was that of the judicial branch. Unfortunately, this branch’s excessive independence and politicization rendered the judge corps a veritable time bomb ready to go off and occupy the power vacuum left by Italy’s politicians in a departure from the Constitutional norm. Institutionally uncontrolled and unaccountable, Italy’s judiciary has always been below standards because it is poorly coordinated with the other powers. Today, many political analysts believe that unless the judiciary is quickly and effectively brought under control and held accountable for their actions, Italy’s judicial branch could threaten not only the workings of the political system and government but Italian democracy itself.

Other factors have also contributed to the failure of Italy’s political system and institutions: Italy’s rigid constitution makes amendments virtually impossible. Judicial review and court precedent, while known, are limited in scope and application. This and the fact that judicial decisions are not a source of law, essentially leaves law making and amending the Constitution almost exclusively in the hands of Italy’s “perfect” bicameral legislature, where each house is a carbon copy of the other as to powers and functions. Understandably, getting the House and Senate of this country’s one thousand-member parliament (where too many parties are still represented) to agree and approve new legislation, can still take weeks, if not months, to negotiate. Of course, the “system” was devised for this very purpose, i.e. to “freeze” the status quo that had emerged at the end of World War II. In that, the Italian system of government has proved to be most successful. In many ways, Italy is a country stuck in the twilight zone of a domestic cold war that never ended.

Today, political analysts are inclined to put the blame for Italy’s problems more on the workings of the country’s political system and institutions rather than on the quality of its leadership (Berlusconi, Monti, Letta and now, Renzi). A revision of the Italian Constitution, which does not sufficiently provide for, nor well distributes, “checks and balances” among the three branches of government (executive, legislative and judicial) such as those incorporated into the American Constitution of 1789, could be in the making. Both constitutions technically-speaking are “rigid”, meaning qualified majorities are required to amend either document. Yet, while the American Constitution has been amended 27 times in a little over 240 years, the Italian Constitution, with 19 amendments in only 70 years, appears outdated, if not obsolete. The apparent edge of the American Constitution may be due to the following:

  • A bi-party system, with electoral rules and regulations that traditionally have made it difficult, if not impossible, for third parties to proliferate and get their representatives elected to Congress. Institutions in equilibrium among themselves with a strong, executive branch headed by a President who is both the head of state and head of government and who, unlike his Italian counterpart, has the power to “hire and fire” his cabinet ministers. The strength of the US Presidency lies in a Chief Executive that is elected to office by the people, albeit indirectly, following a complex system of primaries and caucuses, filtered by an Electoral College, meant to mitigate the excesses of party politics and populism.
  • A legislative branch similarly comprised of two houses: a lower house, known as the House of Representatives, whose members are elected by the registered voters of each state in proportion to the population of that state. It is the House that traditionally holds the initiative on economic / financial matters (i.e. the, “money bills”); a higher house, known as the Senate, represents the sovereign rights and interests of the individual states within the federation and vis-à-vis the federal government. Senators are elected by the registered voters of each individual state in a fixed number of two Senators per state regardless of size or population. Unlike in the Italian parliamentary model, in the American Congress, the legislative role of each house differs by initiative, competence and representation. That and a federal structure guarantees American states more legislative and financial autonomy from their federal government than the Italian Regions are able to exercise vis-à-vis their central government in Rome, with the possible exception of the self-governing provinces of Trento and Bolzano (capital of the German-speaking South Tyrol).
  • A highly sophisticated and complex judicial branch based on a “dual-track” system of state and federal courts. Indeed, each and every American state is a jurisdiction separate and distinct from that of the federal government which in a sense is the overlapping jurisdiction or “glue” that holds America together. Each and every American state has its own legal system, complete with laws, courts, judges and public prosecutors, which in America are not judges although both are recruited from, and open to, lawyers. In Italy the professions are “frozen” much like the political system and institutions of the country are. There is little interaction between one and the other. In America lawyers sometimes begin or end their careers by seeking a judicial appointment or clerkship or by running for the office of district attorney. Not so in Italy. There is hardly any “borrowing” of talents by the “stato” from civilian life or vice-versa in the Italian system. Judges, including public prosecutors are recruited fresh out of law school by civil service examinations and once in office usually stay for life, with most relying on seniority for advancement.
  • In the American system, federal judges are appointed for life by the President and may not be removed, other than by voluntary resignation or following impeachment (by means of a complex proceeding before the House and Senate). State Judges, instead, are often elected on a fixed-term basis from among the lawyers of a given state and forum.
  • Public prosecutors are known as district attorneys. They are not judges but lawyers. These lawyers may be either elected or appointed to their office (depending on the system in place at the jurisdiction) and represent the people of the jurisdiction – generally the county – in the prosecution of criminal offenses. In the US model, criminal prosecution is not mandatory but exercised at the discretion of the district attorney whenever such officer is confident he has collected sufficient evidence against an accused such as to justify spending the taxpayers money on a full-blown trial. In common law jurisdictions, a right to a fair trial keeps courts from prosecuting defendants in absentia. In Italy, public prosecutors can open proceedings against “unknown” offenders or try offenders in absentia without violating due process or the rights of an accused to a fair trial and proper defense. The principle of double jeopardy known in Italy as ne bis in idem (“never twice [for] the same [“fact]”) in common law jurisdictions is strictly applied, making it impossible for anyone found not guilty in the first instance to be subsequently found guilty and sentenced following an appeal, perhaps lodged by the public prosecutor himself! In Italy such a thing can and does happen because the principle of double jeopardy is not strictly applied. Here, public prosecutors are entitled to the same rights of an accused to “due process”, which the Italian Constitution defines as requiring three instances of judicial process before a judgement or sentence acquires the force of res judicata. This explains why and how an accused may be acquitted by an Italian “trial” court and then be convicted for the same crime by an Italian Court of Appeals.

For a country forever teetering between default and decline, with a huge public sector and a government perennially hamstrung by a conflict of interest over economic and financial matters due to the public sector’s dominance of the nation’s economy, it will take more than a cut in public spending or the jettisoning of a few state enterprises to turn the Italian economy around. All Italian “premiers” are aware of this and have talked about the need to legislate economic incentives aimed at attracting foreign direct investments to Italy, now down to a trickle.

To be honest, Mr. Renzi has shown more determination than most. He may very well succeed in doing away with Italy’s “perfect” bicameral legislature. Under the new system, lawmaking would be streamlined with legislative power assigned solely to the Italian House of Representatives. The new Senate would have other powers, including those regarding the Regions and the EU. The new Senate would be reduced from an elected house of 315 to an indirectly elected house of 100 senators made up of 74 regional councilmen, 21 mayors and 5 Presidential appointees.  Referendums would no longer be limited to just veto referendums but would also include intiative referendums. The appointment of “lifetime senators” would become a relic of the past. Still Mr. Renzi will have to do even more if he is to reverse Italy’s decline and transform this paradise of state jobs and public enterprise into a business-friendly venue, capable of attracting foreign investors. The inflow of direct foreign investments to Italy was down to less than 9 Billion Dollars in 2012, this compared to more than 30 Billion Dollars in outflow! Too bad the economy is so dependent on the “stato”.

The need to overhaul Italian Institutions is crucial for the success of Renzi and Italy. Success over the Senate and other minor reforms could galvanize Renzi into taking even greater and bolder actions, especially now that he has begun to wet his appetite with the Senate and other minor reforms, including Berlusconi-like tax breaks for homeowners. If that should happen, Italians could still reverse their country’s economic, political and social decline, which appears rooted more in the obsolescence of “the system”, than in the quality of the leadership. In the globalized world we live in, Italy needs to be able to react well and quickly to the rapid changes taking place beyond its borders.

Based on a writing done in June of 2014.

by pparak