tag:theconversation.com,2011:/us/topics/paolo-gentiloni-34331/articlesPaolo Gentiloni – The Conversation2017-10-11T11:00:12Ztag:theconversation.com,2011:article/854922017-10-11T11:00:12Z2017-10-11T11:00:12ZThere’s an election in Italy next year – and M5S has some familiar problems<p>Those in charge of auditing Rome have said that the budget should <a href="http://roma.corriere.it/notizie/cronaca/17_settembre_29/roma-revisori-oref-bocciano-bilancio-campidoglio-2dfb762c-a50a-11e7-ac7b-c4dea2ad0535.shtml">not be approved</a> as it does not “truthfully and correctly” reflect the municipality’s financial situation.</p>
<p>Meanwhile, Patrizio Cinque, the mayor of Bagheria, a town in Sicily, is <a href="http://www.huffingtonpost.it/2017/09/20/indagato-il-sindaco-m5s-di-bagheria-patrizio-cinque_a_23216208/">under investigation</a> for abuse of office and omission of official acts.</p>
<p>Both Cinque and the Rome administration come from the populist movement M5S, which came to prominence pledging to fight the corruption that has dogged Italian public life for so long. </p>
<p>But hardly a week has gone by since the mayoral elections of June 2016 – when the M5S gained control of several cities across Italy – without one scandal or another casting doubt on the reputation of M5S-run local administrations. Is the anti-establishment, anti-corruption movement founded by <a href="https://www.google.co.uk/search?q=bepe+grillo&oq=bepe+grillo&aqs=chrome..69i57j0l5.3164j0j7&sourceid=chrome&ie=UTF-8">Beppe Grillo</a>, a comedian, becoming a bit too similar to the “traditional” parties it attacks? If so, does it risk losing the support of the people who have flocked to it in recent years?</p>
<h2>A skeleton in every closet</h2>
<p>Italy’s recent history would suggest that this is a distinct possibility. It’s widely believed that the governing Christian Democracy and the Italian Socialist Party would not have collapsed as quickly as they did at the beginning of the 1990s were it not for corruption scandals. A series of investigations had a serious impact on public opinion at the time. </p>
<p>Since its inception, the M5S has exploited (and, in turn, fuelled) public anger towards the country’s “profiteering” political class. But now the tables seem to be turning and there is a question mark over whether it retains credibility as an anti-corruption party today.</p>
<p>The M5S has recently changed the rules on who can run to become prime minister so that even <a href="http://www.beppegrillo.it/m/2017/09/il_candidato_premier_del_movimento_5_stelle_le_regole.html">would-be candidates</a> who are under investigation for wrongdoing can stand. </p>
<p>This change has enabled the selection of Luigi Di Maio – the current vice-president of the Chamber of Deputies – to become the M5S candidate for PM in next year’s election. This despite the fact that he is under investigation for defamation. </p>
<p>Whatever the seriousness of the allegations made against Di Maio, it just doesn’t look good that the rules have been bent to allow him to stand. It looks even worse considering he was the candidate favoured by the party’s founder, Beppe Grillo.</p>
<p>The party that could have benefited from the M5S’s troubles is the Lega Nord (Northern League – LN), which started attacking the political class “of Rome” many years before the M5S even came into existence. Pity, however, that the LN is embroiled in a quagmire of legal proceedings of its own.</p>
<p>Following an investigation that started back in 2013, its founder and former leader, Umberto Bossi, as well as his children, were given prison sentences for <a href="http://uk.reuters.com/article/uk-italy-bossi/founder-of-italys-northern-league-found-guilty-in-fraud-case-idUKKBN19V1WI?il=0">misappropriating party funds</a>. The party’s accounts have now been <a href="http://www.reuters.com/article/us-italy-politics-northernleague/italys-northern-league-criticizes-magistrates-after-bank-accounts-frozen-idUSKCN1BP2UP">frozen</a>, too.</p>
<p>In the meantime, neither of Italy’s other main parties – Silvio Berlusconi’s Forza Italia (FI) and Matteo Renzi’s Partito Democratico (Democratic Party – PD) – can reinvent themselves as a credible “corruption bashing” force. They’ve received their fair share of attention from investigating magistrates in recent years. Indeed, Berlusconi is still barred from parliament, let alone from governing, having been found guilty of bribery as recently as 2015.</p>
<h2>Better the devil you know</h2>
<p>Where does this leave the Italian electorate? It has clearly been deprived of any credible political actors that can put forward those “anti-corruption” discourses that tend to have resonance in the country. And yet there has been no sign that these recent events are having any noticeable impact on the way people are inclined to vote. In fact, the polls have hardly moved for years, with the respective electoral support of the left (i.e. the PD), the right (i.e. FI + LN) and the M5S remaining remarkably stable. </p>
<p>In 2013 each party or “block” attracted around <a href="http://www.repubblica.it/static/speciale/2013/elezioni/camera/riepilogo_nazionale.html">25% of the vote</a>. Now, four years later, each appears to have increased its support slightly, attracting about <a href="http://www.termometropolitico.it/1269538_sondaggi-elettorali-emg-pd-forza-italia.html">27% to 28% of the vote</a>.</p>
<p>Unlike in the 1990s, Italian voters seem to have been “immunised” against political misconduct. Or, perhaps, it is just that anti-corruption voters have nowhere to go now, so they are forced to stay put.</p>
<p>Be that as it may, what is certain is that a general election is coming next spring at the latest. Whether one of the main parties or blocks will be able to govern without some sort of unnatural “grand” coalition becoming a necessity may well depend on the mechanics of whatever <a href="http://www.politico.eu/article/paolo-gentiloni-italy-electoral-law-puts-government-at-risk-this-one-and-the-next/">electoral law</a> is adopted (a crucial question that parties are debating right now). And there is no guarantee that the matter will be resolved any time soon.</p><img src="https://counter.theconversation.com/content/85492/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Daniele Albertazzi has received funding from AHRC, British Academy and the Leverhulme Trust</span></em></p>With corruption scandals dogging practically every party, it’s difficult to see how the electorate can have faith in their representatives. And yet, they keep voting for them.Daniele Albertazzi, Senior Lecturer in European Politics, University of BirminghamLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/804282017-07-04T12:02:06Z2017-07-04T12:02:06ZItaly’s bluff to close its ports to migrant boats heightens tensions in the Mediterranean<p>Tensions in European politics around the arrival of migrants across the Mediterranean Sea escalated in late June as the Italian government <a href="https://www.theguardian.com/world/2017/jun/28/italy-considers-closing-its-ports-to-ships-from-libya">suggested</a> that it could prohibit NGO ships which had rescued people at sea from docking in its ports. </p>
<p>Italy’s ambassador to the EU <a href="https://www.ansa.it/english/news/2017/06/28/italy-takes-formal-eu-migrant-step-ports-cd-be-blocked-2_5c093f91-a194-4c4f-9cbb-8efb2521a5f5.html">told the EU’s migration commissioner</a> that the situation in the country was “at the limit” and “unsustainable”. Italy’s prime minister, Paolo Gentiloni, <a href="http://www.repubblica.it/cronaca/2017/06/28/news/migranti_italia_ue_sbarchi-169383917/">also implored</a> other European countries to stop looking the other way because the situation was “no longer sustainable”. </p>
<p>This is a risky move. Prohibiting rescued migrants from arriving in ports is unlikely to be possible in practice and could go against international law. In the meantime, the political rhetoric is poisoning the way search and rescue at sea is seen in Italy and giving credence to the anti-migrant views of an emboldened far-right. What happens next will be a major test of Europe’s capacity to come up with better ways of responding to migration across the Mediterranean.</p>
<h2>Legal difficulties</h2>
<p>According to the <a href="http://www.imo.org/en/About/Conventions/ListOfConventions/Pages/International-Convention-on-Maritime-Search-and-Rescue-(SAR).aspx">International Convention on Maritime Search and Rescue</a>, states and ships have an obligation to go to the assistance of nearby vessels in distress. Following rescue operations there is also an <a href="http://www.imo.org/en/OurWork/Facilitation/personsrescued/Pages/Default.aspx">obligation that rescued people are taken to safety</a>, regardless of their nationality, status or the circumstances in which they are found. In the Mediterranean this means migrant boats in distress should not be left to sink, nor should they be sent back to Libya, where most of them are now coming from.</p>
<p>In practice, stand offs between migrant boats and the Italian authorities have already happened before. In 1991, <a href="https://www.washingtonpost.com/archive/politics/1991/08/09/albania-and-italy-block-ports/5dd4c235-5f09-4b6c-8ca6-fa9c0e381ccf/">the Vlora</a>, a freighter full of people fleeing Albania, was initially blocked from entering the port of Bari but landed anyway with conditions on board rapidly deteriorating. In 2004, <a href="https://www.theguardian.com/world/2004/jul/12/sudan.italy">the Cap Anamur</a>, a German aid ship, rescued 37 people from a dinghy between Libya and Italy but was stopped from entering Italian ports. After a two-week standoff they were allowed to land when the deteriorating physical and psychological well-being of everyone on board was said to be putting the ship and crew in danger. </p>
<p>These historical stand offs suggest that the current tensions are a bluff – ships are eventually allowed to land. Italy is using the threat to press their European neighbours for increased support. </p>
<p>So far, however, <a href="http://europa.eu/rapid/press-release_STATEMENT-17-1876_en.htm">an expression of “strong solidarity”</a> on July 3 from the French and German interior ministers has offered little in terms of positive, concrete developments. A code of conduct for NGOs will now be drafted by Italy, despite the fact that Mediterranean search and rescue organisations <a href="https://www.humanrightsatsea.org/?smd_process_download=1&download_id=7061">already have one</a>. The Libyan coastguard will be given increased training and financial support but they’ve proved to be unpredictable partners, <a href="http://www.aljazeera.com/news/2017/05/libyan-coastguard-opens-fire-migrant-boats-ngos-170525100451559.html">shooting at migrants and rescue boats</a>. </p>
<p>Efforts will also be made to improve facilities for migrants in Libya but this is likely to be a slow process as the country remains mired in political chaos and insecurity, with migrants held in <a href="http://globalinitiative.net/report-the-human-conveyor-belt-trends-in-human-trafficking-and-smuggling-in-post-revolution-libya/">crowded, unsanitary and often violent detention centres</a>. In any case, Libyan coastguards and other authorities are also <a href="http://www.washingtonpost.com/sf/world/2017/07/02/they-are-not-treated-like-humans-inside-libyas-thriving-migrant-trade/?utm_term=.ba5c31055ab3">reported to have</a> links with migrant smuggling. </p>
<p>Italy may also demand that ports of other countries within Europe or nearer to Libya accept rescue boat disembarkations. A stepping up of refugee relocation out of Italy would be welcome too. In September 2015 it was said that 39,600 relocations would take place from Italy within two years. So far, <a href="https://t.co/wlzda4suJL">only 20% of that figure</a> has been achieved and some EU member states have refused to take anyone in at all. </p>
<h2>Blaming NGOs</h2>
<p>The threat to close Italy’s ports also heralds a worrying escalation of anti-NGO rhetoric within the country. For a while now, rescue operations have been presented by critics as a “pull factor” which makes the dangerous journey across the sea appear less risky to migrants. At the end of 2016, the FT <a href="https://www.ft.com/content/3e6b6450-c1f7-11e6-9bca-2b93a6856354">reported</a> that Frontx, the EU’s border management agency, had circulated confidential reports claiming that NGOs in the Mediterranean worked in collusion with smugglers. A few months later, a prosecutor in Italy <a href="http://www.lastampa.it/2017/04/23/italia/cronache/abbiamo-le-prove-dei-contatti-tra-scafisti-e-alcuni-soccorritori-3fCnqLKWWRHBVUiygHv65K/pagina.html">publicly claimed</a> that he had evidence of it. </p>
<p><div data-react-class="Tweet" data-react-props="{"tweetId":"880335212584022017"}"></div></p>
<p>Political debate fed off these rumours with increased criticism of search and rescue. In April, Luigi di Maio from the Movimento 5 Stelle (Five Star Movement), deplored what he called <a href="http://www.ansa.it/sito/notizie/politica/2017/04/23/migranti-di-maio-ong-hanno-trasportato-criminali-_48c4044a-7c54-42a0-ae81-99464536f076.html">a “taxi service”</a> being run by NGOs for illegal migrants. Matteo Salvini of the Lega Nord party which has long held an anti-immigrant stance, followed up by stating that <a href="http://www.repubblica.it/cronaca/2017/04/30/news/ong_migranti_salvini_dossier-164301374/">Italian secret services had a file</a> recording relationships between smugglers and NGOs. The president of Italy’s parliamentary committee for control of the secret services <a href="http://www.huffingtonpost.it/2017/05/02/la-cei-condanna-gli-attacchi-alle-ong-fuoco-politico-ipocrita_a_22064896/">later denied</a> this. </p>
<p>Despite making public statements about smuggler-NGO collusion, the prosecutor looking into the allegations at the time <a href="http://www.bbc.com/news/world-europe-39686239">had also not yet opened a criminal investigation</a>. He later said that he <a href="http://www.repubblica.it/politica/2017/04/28/news/carmelo_zuccaro_denuncio_non_ho_prove_sta_ai_politici_fermare_il_fenomeno_-164101452/">did not have enough proof</a>.</p>
<p>But xenophobic far-right groups were emboldened. In May, an organisation known as Generazione Identitaria <a href="https://news.vice.com/it/article/estrema-destra-crowdfunding-per-bloccare-ong">physically blocked an NGO ship</a> from leaving port to carry out operations. It has since started crowdfunding to take its own missions at sea to prevent rescues taking place. </p>
<p>Critics have been vocal, and if their claims are justified then it is right that investigations are carried out. But so far, evidence has not been presented. A <a href="https://blamingtherescuers.org/">recent research project</a> found that claims of collusion were based on “biased analysis and spurious causality links”. This is supported by research my colleagues and I did for the <a href="http://www.medmig.info">MEDMIG project</a> in 2015, when we found that migration across the Mediterranean towards Italy was driven more by a need to get out of Libya than by the prospect of being rescued. Many of the people we spoke with knew that they could die at sea, but still considered that to be better than staying where they were. </p>
<p>The threat to close ports shows the governing Partito Democratico to be taking <a href="http://www.ansa.it/english/news/world/2017/06/28/renzi-backs-govt-hard-line-on-migrants_08258469-3f8d-41c7-a59f-a81c208cf471.html">a harder line in its rhetoric on migration</a>. It follows <a href="http://www.politico.eu/article/italy-election-result-berlusconi-led-center-right-scores-upset-wins/">disappointing local elections</a> in late June, and a more vocal anti-migrant stance from the Movimento 5 Stelle’s <a href="https://theconversation.com/rome-mayors-anti-migrant-stance-signals-shift-further-to-right-for-italys-five-star-movement-79529">mayor of Rome</a>.</p>
<p>But the government is also undermining humanitarian work at sea without finding an effective replacement. As <a href="http://msf-analysis.org/bounties-not-bodies-smugglers-profit-sea-rescues-though-no-clear-alternative-available/">noted</a> by Aurelie Ponthieu, a humanitarian specialist on displacement at Medecins Sans Frontieres, search and rescue at sea is not perfect and cannot go on indefinitely. But for now, Europe’s proposals lack a clear, decent long-term alternative to letting people drown.</p><img src="https://counter.theconversation.com/content/80428/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Simon McMahon worked on the MEDMIG project which received funding from the Economic and Social Research Council. </span></em></p>It is a dangerous and illegal move to make.Simon McMahon, Research Fellow, Coventry UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/734922017-02-23T11:31:24Z2017-02-23T11:31:24ZMatteo Renzi just killed off Italy’s centre left<p>Former prime minister Matteo Renzi has resigned as leader of the Italian Democratic Party (PD) in a move that leaves the country’s centre left in ruins. His party is now split, which gives the far right an opportunity to seize government after the next election. </p>
<p>Renzi’s departure was inevitable. He lost a <a href="https://theconversation.com/is-italy-about-to-feel-the-trump-effect-matteo-renzis-referendum-and-the-populist-threat-68891">crucial constitutional referendum</a> in December and resigned as prime minister shortly afterwards, to be replaced by his former foreign minister, <a href="https://theconversation.com/italys-new-prime-minister-cant-shake-off-the-stench-of-a-stitch-up-70098">Paolo Gentiloni</a>.</p>
<p>Smarting from his defeat in the constitutional referendum, and having had to fulfil his promise to the electorate to resign if he lost, Renzi’s tactics have been fuelled by his determination to return to office as soon as possible.</p>
<p>This meant resigning and getting re-elected as leader of the party before going on to win a general election as the prime-ministerial candidate of the PD. It has been widely recognised since his appointment that Gentiloni is merely a stop-gap PM.</p>
<p>Renzi thought he could achieve all this by June (at the latest September) of this year. The left-wing minority inside the PD had other ideas. Their view was that, with the defeat in the referendum, the Renzi experiment was over and that the party needed to find an alternative direction and a different leader. They wanted to keep Gentiloni in office until the end of the parliamentary term in 2018 while the party found a successor, and for Renzi to stand aside.</p>
<p>Renzi, however, was having none of it. “The minority has the right to defeat me but not to eliminate me,” <a href="http://www.ilfattoquotidiano.it/2017/02/21/renzi-minoranza-ha-diritto-di-sconfiggermi-non-di-eliminarmi-poi-dice-non-saro-direzione-vado-negli-usa/3405195/">he said</a>. He called the party Assembly together, presented his proposals, refused to compromise and then played his ace card: resigning as leader, thus forcing the pace of events. The minority had little choice at this stage but to exit the party (although not all of them announced they would).</p>
<h2>An enduring division</h2>
<p>While the current divisions in the PD were prompted by the referendum, the roots go much deeper – indeed, they go back to the founding of the party itself in 2007.</p>
<p>The PD was born of the Olive Tree Coalition (Ulivo), which brought together in alliance two great political traditions in post-war Italy: democratic socialism (as represented by the Democrats of the Left, heirs of the former Communist Party) and progressive Catholicism (the Margherita, or “Daisy”, heirs of the former Christian Democratic Party).</p>
<p>Between 1996 and 2008, Ulivo produced four governments, including two under Romano Prodi and one under Massimo D’Alema, the first former communist ever to be prime minister in Italy. The PD, coming to life during Prodi’s second government, was a merger of these two great political traditions. Its aim was to provide, for the first time in Italy, a single political force of the progressive centre-left realistically large enough to compete for office with the centre right.</p>
<p>Yet, despite producing three prime ministers (Gianni Letta, Matteo Renzi and Paolo Gentiloni) in the ten years since its founding, and despite winning more than 40% of the vote in the 2014 European elections, the PD has never won a general election with an outright majority. Letta was head of a grand coalition and was replaced by Renzi without an election taking place. Renzi was subsequently replaced by Gentiloni following the constitutional referendum defeat.</p>
<p>The PD has never successfully integrated the two former parties into one. Indeed, the two souls of communism and Christian democracy have persisted in the PD. The division has shaped its factions and political debate, as well as its positions on issues such as education, work, welfare, inequality and institutional reform.</p>
<h2>One-man band</h2>
<p>Renzi’s leadership, in particular, has been a jarring experience for the left-wing of the party. He rose to prominence on the basis of a campaign promising to scrap the old leadership of the PD because of its inadequacies. His has been a very individualistic leadership, based on his own beliefs, charisma and personality, and the PD has, it is said, been effectively replaced by the PdR (“Party of Renzi”). His belief in constitutional reform was shaped, he claimed, by the need to improve the efficiency of the Italian political system. His detractors in the party saw it as a means of increasing the power of the prime minister’s office and therefore of Renzi himself, and they resolutely opposed the reform.</p>
<p>For the minority, therefore, the PD’s main problem had become Renzi himself. And since the prospects of removing him seemed more remote than ever after his latest manoeuvre, the only other alternative was to leave. In this sense, it is the end of the PD as we know it.</p>
<p>The party now faces an uncertain future. Numerically speaking, the loss of the left-wing minority does not look significant. The departing parliamentary deputies will likely number between 20 and 30, and they will probably merge with an existing dissident “Italian Left” group of 17 to construct a new political force in parliament.</p>
<p>Yet, the group includes highly influential figures such as former leader Pier Luigi Bersani. Moreover, in the current party system – based, <a href="http://www.sondaggipoliticoelettorali.it/GestioneDomande.aspx">according to polls</a>, on a rough tripolarity between the populist forces, a more moderate centre right and the centre left – the departure of a small group of dissident MPs means a lot. It consigns to the dustbin the PD’s vocation of a single party majority government and simply recreates the necessity of an alliance between the centre-left and the left to govern.</p>
<p>It also gives a huge fillip to the populist <a href="https://theconversation.com/what-is-italys-five-star-movement-69596">Five Star Movement</a> and the Northern League, which now feel closer than ever to seizing office whenever elections are called. Ironically, therefore, even though Renzi’s hard line is likely to consolidate his leadership of the PD and increase his internal dominance, it may turn out to be a Pyrrhic victory.</p><img src="https://counter.theconversation.com/content/73492/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Martin J Bull does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>The former PM has resigned as leader of his party in the hope of returning to the top job. But it hasn’t quite gone to plan.Martin J Bull, Professor of Politics, University of SalfordLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/700982016-12-16T09:20:33Z2016-12-16T09:20:33ZItaly’s new prime minister can’t shake off the stench of a stitch-up<p>Only days after its prime minister resigned over a lost referendum, Italy found itself with a new government and a new prime minister, Paolo Gentiloni. But however smooth the transition was, the turbulent circumstances that led up to it are far from resolved.</p>
<p>The referendum rejected Matteo Renzi’s proposal to rewrite approximately a third of the constitution and recalibrate the dysfunctional relationship between the chamber of deputies and the senate. It was a risky move – and by polling day, it became a referendum on him and his administration, with populist opposition parties the <a href="https://theconversation.com/what-is-italys-five-star-movement-69596">Five Star Movement</a> (M5S) and the <a href="http://www.politico.eu/article/italys-other-matteo-salvini-northern-league-politicians-media-effettosalvini/">Northern League</a> seizing their chance to rail against the establishment.</p>
<p>Thanks to Italy’s weak economic situation, this all drew unprecedented international attention, with European elites especially worried about the potential political and economic shock that a No vote might trigger. But when that vote came, the sky didn’t fall in. The <a href="https://theconversation.com/markets-are-muted-after-italy-referendum-but-instability-simmers-under-the-surface-69922">markets</a> had clearly pre-adjusted in anticipation; minus a temporary fall in the value of the euro, they seemed ready to give Italy time to sort itself out. And so it did. </p>
<p>Renzi kept his promise and resigned immediately. The president, Sergio Mattarella, knew that calling fresh elections was not an option: while the constitutional reform was rejected, the new electoral law for the Chamber of Deputies is already in place, meaning Italy now has two different electoral systems for two chambers with identical powers. Without further electoral reforms, different parties or coalitions could end up majorities in each chamber, virtually guaranteeing legislative gridlock.</p>
<p>Mattarella spent two days in hectic discussions with delegations from all 26 political parties and groupings. Renzi’s Democratic Party did its bit by helping Mattarella identify who would secure the party’s support, and once a clear consensus emerged, Mattarella gave Paolo Gentiloni a mandate; he moved quickly to choose his ministers, who were sworn in on December 9.</p>
<p>By Italian standards at least, this was a remarkably swift transition between governments – at only 17 minutes, Gentiloni even broke the record for the
shortest-ever confidence speech – but it comes with a strong dose of irony and déjà-vu. The referendum may have issued a verdict on Renzi and his government, but what has been installed instead appears to be little more than a refitted version of what Italy apparently rejected.</p>
<h2>Same as the old boss</h2>
<p>Gentiloni is no outsider. He was a member of the Democratic Party’s founding committee in 2007, supported Renzi’s successful leadership bid in 2013, and served as his minister of foreign affairs. His government’s majority is almost identical to Renzi’s, and his cabinet almost a carbon copy, with all but five ministers held over. Even Maria Elena Boschi, who was responsible for getting the failed proposal through parliament and who had promised to resign in the event of a No vote, was not just kept on but promoted. </p>
<p>Gentiloni’s goals are much the same as Renzi’s: electoral reform, sorting out the crisis in Italy’s banks, relief measures to the Italian earthquake zone and securing agreement with the unions on a new public workers’ contract. In his confidence speech, he explicitly embraced the Renzi government’s record and claimed continuity with it. Renzi himself remains leader of the Democratic Party; he has already made it clear that far from retiring, he wants to lead the party into the next election campaign with a view to winning and then continuing his programme of reform.</p>
<p>So while Gentiloni can claim to be a stabilising force in a time of crisis, he’s also viewed as a player in an establishment stitch-up. The transition protects the government from the blow dealt to Renzi, and gives him and his troops time to regroup. As far as the anti-establishment is concerned, it’s almost as if the Yes vote won after all. It’s not lost on them that Gentiloni is now the fourth prime minister in a row to have been appointed without a clear electoral victory; the last leader with that sort of legitimacy was <a href="https://www.theguardian.com/world/2008/may/02/italy.thefarright">Silvio Berlusconi</a> when he was returned to power in May 2008.</p>
<p>Small wonder then that this government has already drawn as much opprobrium as any other in the history of the Italian Republic. The opposition parties took the unprecedented measure of boycotting the parliamentary confidence debate, expressing their views in the piazza and online. Gentiloni was left to speak to a half-empty chamber. Many view the new government as little more than a device to keep the anti-establishment parties out of power – but their chance can’t be far off. </p>
<p>On his blog, M5S leader Beppe Grillo <a href="http://www.beppegrillo.it/2016/12/questo_governo_e_stato_sfiduciato_da_20_milioni_di_italiani.html">declared</a>: “This government has received a vote of no confidence from 20m Italians.” And while it has not been formally acknowledged, politicians and party spokesmen have made it clear that this government’s lifespan will match the time it takes to pass a new electoral law. </p>
<p>Once that’s done, the pressure on Gentiloni to resign and allow fresh elections will be overwhelming. In the end, he’ll most likely go down in history as just the latest steward of a short-lived interim government.</p><img src="https://counter.theconversation.com/content/70098/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Martin J Bull does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Paolo Gentiloni’s government is barely distinct from his predecessor’s, and its mandate is desperately thin.Martin J Bull, Professor of Politics, University of SalfordLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/704402016-12-15T15:17:30Z2016-12-15T15:17:30ZWhy EU rules risk making Italy’s banking crisis a whole lot worse<figure><img src="https://images.theconversation.com/files/150295/original/image-20161215-13679-1i6g9ds.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">The coming storm. </span> <span class="attribution"><a class="source" href="https://www.shutterstock.com/pic-208489615/stock-photo-italy-waving-flag-on-a-bad-day.html?src=iHt5JyDUS7e1XpvAm8vzQw-1-66">ESB Professional</a></span></figcaption></figure><p>In the wake of the Italian <a href="https://theconversation.com/italys-no-vote-lights-another-fire-under-the-european-union-69919">constitutional referendum</a>, the country’s banking crisis is going from bad to worse. The European Central Bank (ECB)‘s <a href="https://www.ft.com/content/710e0b76-c132-11e6-9bca-2b93a6856354">decision</a> to refuse an extension to <a href="http://english.mps.it/Pages/index.aspx">Banca Monte dei Paschi di Siena</a> to raise €5 billion (£4.2 billion) has left the country’s third-largest bank facing a government bailout that looks likely to inflict severe pain on many ordinary Italian savers. </p>
<p>As if that were not enough, Italy’s biggest bank, UniCredit, <a href="http://www.bbc.co.uk/news/business-38299542">announced</a> a restructuring plan that requires a capital raising of €13 billion in the first three months of next year. Given the torrid time Monte dei Paschi has had trying to find sufficient private backing, will UniCredit need help from the Italian taxpayer, too?</p>
<p>The problems at Monte dei Pashci and UniCredit reflect the parlous state of the country’s banking system. The economy <a href="https://www.gfmag.com/global-data/country-data/italy-gdp-country-report">has been</a> struggling for a number of years and borrowers have been defaulting, creating a mountain of bad loans. Around 20% of bank loans <a href="http://www.wsj.com/articles/bad-debt-piled-in-italian-banks-looms-as-next-crisis-1467671900">are</a> bad, <a href="https://infostat.bancaditalia.it/inquiry/#eNqVjrEKwjAURX8oJC%2FFWixkSNJXCCZpIWkRl9ChgiAoKOrQjzcITuLgXe7hLPdiX1st0BP0o7Bm%0ARKLjTjSmbYl2Qkm%2FNVFaI9ltep5rPSgMGEU%2FKGUTwPKBBEUCnmD1bTIsMegCNhyIiegCWtwLp2SS%0AEXVHHeVQAQCnZZGrKiELTk2kgfOMOWsgXY9eHKbTdWbz5ddndj%2FOj%2FdL04R%2FJ9gLHtRGGQ%3D%3D">amounting to</a> a staggering €360 billion (<a href="http://www.cnbc.com/2016/11/29/italian-banks-hold-nearly-a-third-of-euro-zones-bad-loans-ecb.html">about</a> one-third of all bad loans in the eurozone). </p>
<p>More than 70% of these loans <a href="https://www.imf.org/external/pubs/ft/wp/2016/wp16135.pdf">are to</a> small and medium-sized businesses. Small firms in Italy tend to have numerous bank relationships, commonly with accounts at four or five banks. Hence their defaults have polluted bank balance sheets across the sector. </p>
<p>I hear critics saying the Bank of Italy, the regulator, was slow to deal with the problem, only intervening within the past 18 months. Individual banks also stand accused of being complicit in rolling over non-performing loans – disguising the true picture. The situation is worse for banks in the south, where economies have been faring even worse. And Matteo Renzi’s defeat in the referendum exacerbates the whole problem by denying the sector reforms to help banks recover bad loans by speeding up insolvency processes, among other things. </p>
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<a href="https://images.theconversation.com/files/150301/original/image-20161215-13679-1xn48ur.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/150301/original/image-20161215-13679-1xn48ur.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/150301/original/image-20161215-13679-1xn48ur.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=411&fit=crop&dpr=1 600w, https://images.theconversation.com/files/150301/original/image-20161215-13679-1xn48ur.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=411&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/150301/original/image-20161215-13679-1xn48ur.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=411&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/150301/original/image-20161215-13679-1xn48ur.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=516&fit=crop&dpr=1 754w, https://images.theconversation.com/files/150301/original/image-20161215-13679-1xn48ur.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=516&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/150301/original/image-20161215-13679-1xn48ur.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=516&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
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<span class="caption">Too much good life?</span>
<span class="attribution"><a class="source" href="https://www.shutterstock.com/pic-259651475/stock-photo-delicious-spaghetti-on-a-fork-close-up-on-black-background.html?src=zHQZNMN6JOJBMYko5oG0iw-1-68">Irene van der Meijs</a></span>
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<h2>The bail-in problem</h2>
<p>The Bank of Italy <a href="https://www.ft.com/content/3e5b44ec-9207-11e5-bd82-c1fb87bef7af">restructured</a> four small banks last year, but its ability to rapidly resolve problems at bigger banks is hindered by EU <a href="http://eur-lex.europa.eu/legal-content/en/TXT/?uri=CELEX%3A32014L0059">bank bailout</a> and <a href="http://ec.europa.eu/competition/state_aid/overview/index_en.html">state aid</a> rules. These say direct state aid cannot be provided until a bank has looked for private injections of capital, including making investors in a class of bank debts known as <a href="http://www.irishtimes.com/business/financial-services/banks-plan-bail-in-bond-sales-ahead-of-new-european-rules-1.2841766">bail-in bonds</a> take some pain by converting their bonds into shares. </p>
<p>The logic is that these unsecured bondholders should bear the same risks as shareholders, thus reducing the burden on the taxpayer in the event of a rescue. Investors have nonetheless been lured into these bail-in bonds, including those of Monte dei Paschi and UniCredit, by higher returns than other bank bonds, betting they would not end up being converted. </p>
<p>In most countries institutional investors including pension funds and insurance companies are the main investors in unsecured bank bonds. But in Italy there’s an additional problem: households <a href="https://www.ft.com/content/5aabd08c-4916-11e6-8d68-72e9211e86ab">own about</a> a third of the total – 40,000 retail investors <a href="http://uk.reuters.com/article/us-eurozone-banks-italy-montepaschi-idUKKBN1400V8">own</a> Monte dei Paschi bonds, for instance. </p>
<p>When the four small Italian banks <a href="http://www.bbc.com/news/world-europe-35062239">were restructured</a>, the value of their bonds was wiped out. In addition to political condemnation, there were widespread protests and at least one suicide. Particularly when the country is going through such a politically volatile <a href="https://theconversation.com/what-is-italys-five-star-movement-69596">period</a>, the government will be very wary of another bail-in as part of any Monte dei Paschi rescue. Depositors above around €90,000 are also supposed to lose out, though it is hard to see this being politically possible regardless of the rules.</p>
<h2>What comes next</h2>
<p>The ECB decided the request from Monte dei Paschi for a deadline extension for its recapitalisation from year-end to January 20 was a delaying tactic. It said the bank had to sort things out faster – together with the new Italian government, headed by Renzi loyalist <a href="http://www.bbc.co.uk/news/world-europe-38290098">Paolo Gentiloni</a>. This means the world’s oldest bank, established in 1472, now has barely two weeks to find a private solution and avoid inflicting a bail-in on the country. </p>
<p>The recapitalisation plan has three components. The first is a voluntary bond swap – similar to bail-in bonds, except bondholders choose whether to convert their bonds to shares or not. This <a href="http://www.wsj.com/articles/italys-monte-dei-paschi-to-reopen-debt-to-equity-swap-offer-1481494685">has raised</a> around €1 billion from institutional investors, but there has been no take-up from retail investors. They have viewed the exchange as too risky and have been concerned about whether the regulator has fully approved the retail swap transactions. </p>
<p>Second, Monte dei Paschi hopes to get €1 billion from Qatar’s sovereign wealth fund. Finally, a consortium of banks has said it will try to sell the bank’s shares in the open market. They will not be underwritten, however, so there is no guarantee of raising significant funds. </p>
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<a href="https://images.theconversation.com/files/150299/original/image-20161215-13651-w8l3ep.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/150299/original/image-20161215-13651-w8l3ep.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/150299/original/image-20161215-13651-w8l3ep.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=398&fit=crop&dpr=1 600w, https://images.theconversation.com/files/150299/original/image-20161215-13651-w8l3ep.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=398&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/150299/original/image-20161215-13651-w8l3ep.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=398&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/150299/original/image-20161215-13651-w8l3ep.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=501&fit=crop&dpr=1 754w, https://images.theconversation.com/files/150299/original/image-20161215-13651-w8l3ep.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=501&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/150299/original/image-20161215-13651-w8l3ep.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=501&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">The sick old man of Italy.</span>
<span class="attribution"><a class="source" href="https://www.shutterstock.com/pic-461329066.html">francesco carniani</a></span>
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<p>So even if the capital-raising is successful there is likely to be a shortfall of several billion euros. The question then is what happens next. The government will certainly not let this historic institution fail, despite a <a href="http://www.tradingeconomics.com/italy/government-debt-to-gdp">national debt</a> in excess of 130% of GDP – among the highest in the world. </p>
<p>Failure to resolve the problems would compound financial market jitters surrounding Italian banks. That could lead to widespread failure and the export of similar problems, due to a collapse of confidence, to other fragile eurozone countries. </p>
<p>To unlock an injection of state funds the Bank of Italy would therefore need to decide whether to follow the EU rules and risk the wrath of the retail bondholders with a bail-in – and/or provide guarantees to cover their losses. Ironically, the ECB would then potentially have to provide guarantees, liquidity injections and capital support to maintain confidence in the Italian system. </p>
<p>Meanwhile, all eyes will be on the UniCredit capital-raising to see if it fares any better. It should do: UniCredit’s proposed rights issue requires market credibility that Monte dei Paschi does not have at present. Were it to hit difficulties, however, this crisis will move from major to monumental. Either way, it looks likely to be some time before the problems in Italian banking even begin to look like being resolved.</p><img src="https://counter.theconversation.com/content/70440/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Philip Molyneux does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Problems at Monte dei Paschi and UniCredit are bad enough without bail-in rules to contend with.Philip Molyneux, Professor of Banking and Finance, Bangor UniversityLicensed as Creative Commons – attribution, no derivatives.