Italy's New M5S-PD Government Not Quite a Done Deal

On Wednesday Italian president Sergio Mattarella gave his permission to recently resigned prime minister Giuseppe Conte to form a new government, this one, as Jason Horowitz describes,  "a populist/anti-populist coalition between Five Star and the center-left Democratic Party."

Beppe Severgnini, writing an opinion piece today for The New York Times, is skeptical that M5S-PD will be a lasting marriage:

Still, the outcome is not obvious. A new government is likely to be formed, in the next few days. But the Democratic Party and the Five Star Movement are quite different, and so are their voters. If their strange marriage fails, President Mattarella — the coolest head in this whole mess — will have no choice but to dissolve Parliament and call for a general election in the autumn. So Italy is, once again, on the brink — a spot it occupies all too often. Will it manage to take a step back and avoid going over? It might. On three conditions.

First, the political agenda. A government is formed to do something, not to prevent someone else’s rise (even if that someone is Mr. Salvini). The Democratic Party stands for open society, open market, investments, Europe and NATO; Five Star has been toying with conspiracy theories and anti-vaxx propaganda, has ranted against the European Union and supported Nicolás Maduro in Venezuela. The Democrats belong, in most respects, to the new moderate left; the Five Stars borrow many ideas from the old radical left. A good sign is that the most quarrelsome characters, such as Alessandro Di Battista, are not expected to be in the new government. And the outgoing (and incoming) prime minister just took control of the digital transformation of the notoriously labyrinthine Italian Civil Service.

In other words, what this "government waiting to be born" really is, more than a coalition of populist/anti-populist, as Horowitz formulated, is a coalition of neoliberal/anti-neoliberal. The Five Star Movement established itself criticizing neoliberal austerity and corruption.

David Broder thinks M5S is cravenly opportunistic, stands for nothing and its Rousseau online plebiscite a sham.

We'll see. Luigi Di Maio has promised to clear the new coalition with the M5S rank'n'file. According to Horowitz:

To allay the concerns of the Five Star base, Mr. Di Maio late Tuesday night announced that any government proposals would be subject to a vote on Five Star’s internet platform, where all their candidates and policies are approved.

The platform, called Rousseau, is owned by Davide Casaleggio, an unelected web entrepreneur, who has argued that representative democracy is passé and will soon be replaced by the internet. Party dissidents have said he personally decides the outcome of online votes and is the true power behind Five Star.

On Wednesday, Andrea Orlando, the deputy secretary of the Democratic Party, told reporters that it would be “unacceptable if the vote on Rousseau should enter into conflict with the procedures in the Constitution and on the decisions taken by the president.”

But in an interview Wednesday night, Pietro Dettori, a power broker within Five Star who is close to Mr. Casaleggio, said that while the date of a vote still hadn’t been set, it “will also be on the alliance.”

Why Italy is Important: The Neoliberal Center No Longer Believes Its Own Prescriptions

Isn't the irony rich that markets are responding so negatively to the diktats of their champions? The M5S-League government was aborted in deference to the wisdom of the markets, and the markets have deemed this an unwise decision. As Yves Smith says this morning in "NIRP’s Revenge: Italian Bonds Plunge, Worst Day in Decades":

Yves here. While Mr. Market got in quite a tizzy today over 5 Star and Lega’s abandonment of their effort to form a coalition government after the President Sergio Mattarella nixed their choice of economy minister, Paolo Savona. This has produced a first-class political crisis. The technocrats, in trying to appease Mr. Market, has done the reverse.

The Times editorial board spins this obvious blunder -- this is the preferred argument du jour for neoliberals -- as a necessary move to allow Italian voters to come to their senses:

However spooked the markets were, they had been equally wary of the coalition and its grandiose spending plans, and given the mutual hostility of the coalition partners, their government might not have survived for long. Mr. Mattarella’s stand, at least, gives Italian voters a second chance to weigh their options after glimpsing what their earlier choices might mean. That’s something some Brexit voters in Britain, or Trump voters in the United States, might have welcomed.

Such an argument doesn't appeal to Italians though, as Steven Erlanger notes in his lengthy write-up, "Italy Pushes Euro to Fore, the Last Place Europe Wants It":

On Tuesday, the European Commissioner for the budget, Günther H. Oettinger, a German, told the broadcaster Deutsche Welle that the markets and a “darkened outlook” would teach the Italians to vote for the right thing. 

They may yet do so, but it’s impolitic to say so, especially for a Brussels-based German.

One of the first to point out the offense was Mr. Di Maio himself, who in his own message on Twitter called the remark “absurd.”

“These people treat Italy like a summer colony where they come to vacation,” Mr. Di Maio wrote. “But in a few months a government of change will be born and Europe will finally respect us.”

Di Maio is right; hence, the market reaction.

This marks an important turning. The neoliberal center no longer believes in its own prescriptions.

"Italian Voters! Achtung! We're Doing You a Favor by Not Honoring the Results of This Election."

UPDATE: Succinct statement on Italy's political crisis lifted from the comments section of this morning's post, "Italy’s Political Crisis….How Ugly Might It Get?," by Yves Smith:

Please take the time, if you will, to ponder on article 1 of the Italian Constitution, and tell me how 25% unemployment, a majority without government, a government without majority, the fifth unelected prime minister in 5 years and street protests against the Head of State square with this:

Italy is a democratic Republic founded on labour. Sovereignty belongs to the people and is exercised by the people in the forms and within the limits of the Constitution.

****

I read the headline in the airport "Populist Parties in Italy Fail to Form Government," and I was confused. I had been away from newspapers and television news over the weekend. Last I heard the M5S-League government was on its way to a successful launch. Maybe there had been a last second dust-up between Salvini and Di Maio over the choice of Paolo Savona, an academic who has questioned the wisdom of the euro, as minister of the economy.

But that was not the case. Reading the story by the odious Jason Horowitz, it was apparent that the headline was one of the more misleading in a seemingly daily grab bag of misleading headlines. The populist parties did not fail to form a government. President Sergio Mattarella tomahawked the infant government as it was exiting the birth canal.

In this he did the bidding of the banks, the member states of the European Union, as well as the mainstream press. All had been calling for Mattarella to crush the M5S-League upstarts. They got their wish. Even better for the neoliberal center, Mattarella asked a former International Monetary Fund bureaucrat to form a new government.

As Jason Horowitz reports today in story with a much more accurate headline, "Italian President’s Loyalty to the Euro Creates Chaos":

On Monday morning, as markets rose and fell with the whiplashing events in Italy, Mr. Mattarella gave a new mandate to form a government to Carlo Cottarelli, a respected economist, former International Monetary Fund official and Italian government appointee, who told reporters that he would form a caretaker government only with the goal of passing a budget and guiding Italy to new elections.

If Parliament votes in support of his caretaker government, elections would take place in early 2019. If it does not, which seems much more likely, he would quit “immediately” and elections would take place sometime after August.

RT reports that there is zero chance that Cottarelli's technocratic government will be supported in parliament:

Italian journalist Marcello Foa told RT that Cottarelli’s chances of forming a new government are “non-existent,”noting that the anti-establishment Five Star Movement (M5S) and its rightist coalition ally Lega Nord are unlikely to support Cottarelli’s efforts because they would then “lose all credibility with the voters.” The two parties were the top performers in March’s parliamentary elections and have spent the last two months negotiating the formation of a coalition government.

Yanis Varoufakis appears on the mark with his dissection: "President Mattarella of Italy: From moral drift to tactical blunder":

Beyond his moral drift (as he condones Mr Salvini’s industrial-scale misanthropy while vetoing a legitimate concern about the eurozone’s capacity to let Italy breathe in its midst), President Mattarella has made a major tactical blunder.

In short, he fell right into Mr Salvini’s trap. The formation of another ‘technical’ government, under a former IMF apparatchik, is a fantastic gift to Mr Salvini.

Mr Salvini is secretly salivating at the thought of another election – one that he will fight not as the misanthropic, divisive populist that he is but as the defender of democracy against the Deep Establishment. Already last night he scaled the high moral with the stirring words: “Italy is not a colony, we are not slaves of the Germans, the French, the spread or finance.”

If Mr Mattarella takes solace from the fact that previous Italian Presidents managed to put in place technical governments that did the establishment’s job (so ‘successfully’ that the country’s political centre was destroyed), he is very badly mistaken. This time around he, unlike his predecessors, has no parliamentary majority to pass a budget or indeed to give his government a vote of confidence. Thus, he is forced to go into elections that, courtesy of his moral drift and tactical incompetence, will return an even stronger majority for 5S-Lega, possibly in alliance with the enfeebled Forza Italia of Silvio Berlusconi.

And then what Mr Mattarella? 

For a sample of how the mainstream is spinning Mattarella's radical move, take a look at "What Comes Next for Italy?" by Beppe Severgnini, editor in chief of Corriere della Sera’s magazine 7:

Right or wrong, the financial markets and the rest of Europe were convinced that the proposed government was a fundamental threat; now that it has been sidetracked, they will do what they can to prevent its return.

[snip]

It sounds naïve to say it, but the real winners here are Italy’s voters. Thanks to their coolheaded president, they have a chance to rethink their answers to a very important question. By voting for the League and Five Star, they set Italy on a collision course with the European Union. British voters made a similarly emotional decision to leave the union, and they don’t get a second chance. Italy should consider itself lucky: A solid Constitution is better than a rushed referendum.

This is how the radical neoliberal center paves the way for fascism -- "Voters! Achtung! We're doing you a favor by not honoring the results of this election."

NYT Editorializes Against New Italian Government

The editorial page of The New York Times takes aim at Italy's nascent M5S-League government in "The Populists Take Rome." Its main purposes is to repeat previous slurs: Conte inflated his resume with universities he never attended; Di Maio is a college dropout; Salvini wears a sweatshirt (oh, my). It's exhausted and foolish. One imagines that these nameless editorial writers feel suffocated having to churn out attack after attack in defense of a status quo to which no one is devoted other than the rich and powerful.

The exhaustion is on display in the tepid concession paragraph:

Yet the new Italian government cannot be dismissed as just another in Italy’s long history of political crises. The shift of a core member of the European Union, one whose allegiance to the “European project” had not been in doubt, toward the new Central European members hostile to Brussels is a serious blow to the deeper European integration championed by President Emmanuel Macron of France and Chancellor Angela Merkel of Germany.

The editorial doesn't mention that Merkel is on her way out and Macron is diminishing by the day. The political center as wishfully conceived by The New York Times does not exist.

Jason Horowitz Now in Rome Up to His Usual Dirty Tricks

UPDATE: An absolutely damning piece on the M5S-League government in formation (Lib-Pop Politics: Italy’s New Government Is More Neoliberal Than Populist by Mario Pianta) was posted this morning by Yves Smith. Pianta's point is that M5S is rudderless while Salvini's League is on the ascent:

Current polls reflect this trend of a growing Lega and a stable Five Stars consensus; when Five Stars support weakens – as happened in the peripheries of Rome and Turin, run by weak Five Stars mayors – Salvini is set to grab a large part of their disappointed voters. Thus, the political outlook suggests Salvini as a likely winner of a real majority for the centre-right whenever new elections take place, giving him the upper hand in talks for the new government – the alternatives being an early vote in autumn or in May 2019 when they could be held together with the European elections.

That's something to think about: If Mattarella somehow tomahawks the nascent government, which is the drumbeat in the corporate press, and another round of elections is scheduled, Pianta argues that the League would be the clear winner with the center-right coalition likely able to form a government on its own.

The reason Pianta sees this as a problem is that the League is nothing more than Italian Trumpism, espousing tax cuts and bashing immigrants. Pianata concludes with this sobering assessment of the M5S-League program:

The asymmetry between a Lega with clear priorities – in terms of class and nation – and a Five Stars with its only concern to strike a deal, has produced a government programme that includes some general concerns of the Five Stars – on legality and minimum income – and most practical measures designed by the Lega – on taxes and migrants.

Demands for renegotiating European treaties and restoring national sovereignty in some areas are enough to open up a rhetorical confrontation with Brussels – and much attention from the media. But they have little concrete content.

The most important specific policy that will be introduced by the new government is the Italian version of the ‘flat tax’; firms and individuals will pay either 15 or 20% of income taxes, as opposed to the current 43% for the top income bracket.

It is clearly stated that no wealth tax will be introduced (Italy has often been criticized by the EU for having cancelled real estate taxes on home-owners). Tax controls on Italy’s large number of small firms and self-employed will be scaled down, basically legalising tax evasion for a large number of right-wing, medium and high-income voters.

For financial firms and banks no control or limit on their activities will be introduced. This will make Italy a neoliberal business paradise, competing with Ireland in the race to the bottom of business taxes in Europe, offering some room for the survival of Italy’s small businesses dramatically hit by a decade of crisis.

In this way, the transfer of income to the richest 20% of Italians will be huge, with the very rich benefiting the most. Berlusconi would have never been able with his past majorities to introduce such a pro-rich agenda.

Such measures are the easiest to implement, as they simply scale back state redistribution, leaving unequal outcomes of market processes untouched. More difficult is the implementation of the only ‘pro-poor’ measure long championed by the Five Stars: the so-called ‘citizen income’. In the programme this is reduced to an income support of €780 a month for a maximum of two years for unemployed Italians (no residents with foreign citizenship will obtain it) ready to accept any job offer; no figure for potential recipients or funding for implementing it is mentioned.

But the darkest success of the Lega in the government programme is the chapter on migrants, envisaging a stop to the flows of refugees, changes in European rules on asylum and free movement, and proposing the repatriation of the 500,000 immigrants with irregular status now present in Italy.

Combined with harsh measures on law and order, this policy caters to the ‘fear effect’ that is behind the growth of Lega’s support. In parallel the rise of the Five Stars was based on a ‘poverty effect’ – especially in the South (see here). The tragedy is that the poorest Italians have overwhelmingly voted for two political forces that are now creating the most pro-rich, pro-business government in Italy’s history. Even worse, Lib-pop politicscould be just the starter for an outright far-right political future.

****

My suspicion when Jason Horowitz was made bureau chief of Rome by The New York Times, a reward for his work in slandering Bernie Sanders' 2016 presidential campaign, is that the flagship of neoliberal hegemony was positioning a poison pen to take out the biggest internal threat to the European Union, Italy's Five Star Movement (M5S).

Horowitz faced a tough pull during the run-up to parliamentary elections because the political center has absolutely collapsed in Italy. While he churned away with his typical attacks, it was all just so much piss in the wind because it was clear that the insurgent parties, M5S and Northern League, were going to kick ass. And kick ass they did. In France, the NYT praised a party of neophytes, Macron's En Marche! And anything tech based usually garners accolades aplenty from the Gray Lady. But M5S does not support the Washington Consensus. So it must not be allowed to govern.

Horowitz earned his supper the other day when he published an innocuous two paragraphs in "Italy’s Populists Offer Giuseppe Conte for Prime Minister; N.Y.U. Claim in Question" casting doubt on the M5S-League candidate for prime minister, Giuseppe Conte:

[Giuseppe Conte] lists research at famous universities around the world, including Yale, the Sorbonne in France and New York University, where he said he “perfected and updated his studies” while staying at the college for at least a month every summer between 2008 and 2012.

Asked about Mr. Conte’s experience at N.Y.U., Michelle Tsai, a spokeswoman, said Monday, “A person by this name does not show up in any of our records as either a student or faculty member,” adding that it was possible he attended one or two-day programs for which the school does not keep records.

Clearly Washington's plan is to strangle the M5S-League government in the cradle. Bloomberg has at least a story a day which all but beg the Italian president Sergio Mattarella to take over. It's fascism without the slightest hint of a mass base.

Another Brexit-Size Shock to the EU?

It finally happened. A government is on the verge of being formed in Italy.

Italian parliamentary elections took place on March 4, followed by round after round of inconclusive negotiations. The main sticking point for the top vote-getting party, the Five Star Movement (M5S), was the center-right's insistence that Silvio Berlusconi be prime minister.

Once the League's Matteo Salvini agreed to sideline the octogenarian -- the League is the real power of the center-right coalition, not Berlusconi's Forza Italia -- things got cooking; that, and president Sergio Mattarella threatened to name a technocratic caretaker government.

The League-M5S plan has been published, and it has two components that are sure to stir things up: an end to the EU sanctions on Russia and an increase in debt spending. RT crows, "Italy’s anti-establishment Five Star Movement and Lega Nord parties have called for an immediate lifting of sanctions imposed on Russia." Reuters outlines other features of the plan:

The document, published after 11 weeks of political stalemate in the euro zone’s third-largest economy, calls for billions of euros in tax cuts, additional spending on welfare for the poor, and a roll-back of pension reforms.

The euro sank on the latest developments on Friday and was headed for its fifth straight weekly fall against the dollar, in what would be a first for the currency since 2015.

The possibility of a eurosceptic government in Rome is shaking investor confidence ... at this point, a larger fiscal deficit and greater bond issuance (in Italy) does seem likely,” said David Madden, a strategist at CMC Markets.

The euro gave up gains and fell 0.2 percent to $1.1778 after the Italian parties outlined their economic plans. It settled near a five-month low reached on Wednesday of $1.1763.

The final accord dropped a previous draft proposal, seen by Reuters, to create fiscal headroom by adjusting the formula used to calculate debt burdens in the EU, and contained nothing questioning Italy’s membership of the euro.

But it still called for a review of EU governance and fiscal rules — setting the stage for the bloc’s biggest political challenge since Britain voted to leave two years ago.

So we're right back to back to Syriza 2015 and the question of whether a nation-state can change course through democratic elections or is the status quo so cemented in place that nothing short of armed rebellion can alter the neoliberal Washington Consensus.

The neoliberals are pining for Mattarella to take control, which Politico encapsulates here:

What role does the president play?
If the deal passes muster with members, the parties will present it to President Mattarella. As guarantor of Italy’s constitution and international treaties, he has the power to approve or reject ministers and even specific bills in the government’s program if he deems them to be unaffordable. He can even reject the coalition government altogether and appoint his own — a power that has been used once before, in 1953.

M5S's Luigi di Maio and Salvini are going to meet with Mattarella Monday. M5S members are currently voting online whether to support the new government. The candidate for prime minister has yet to be named.

Signs are good that an M5S-League government will be the real deal. Reuters says that, "Salvini’s pre-election ally, former prime minister Silvio Berlusconi, accused him of betraying their centre-right electoral alliance and urged him to back out of the deal with Di Maio and 'come back home'."

The U.S. is already making threats about upending Russian sanctions. From Politico:

In June, the European Council will have to roll over the Russian sanctions that the two parties strongly oppose. Last month Kurt Volker, U.S. President Donald Trump’s special envoy for Ukraine, warned Rome that “Italy cannot lift the measures without serious consequences.”

An outbreak of European democracy comes just at the right time. The U.S. is trying to maintain the Continent's vassalage as Trump lurches from brinkmanship in East Asia to the Middle East.

The Washington Consensus is now clearly held together by nothing other than war -- economic warfare, armed conflict, genocide and information war. May the consensus collapse as soon as possible.

What Comes Next is Fascism

With the Italian general election a few days away The New York Times is definitely gunning for the Five Star Movement (M5S). Yesterday it was "The Mystery Man Who Runs Italy’s ‘Five Star’ From the Shadows." Today it is "Will Russia Meddle in Italy’s Election? It May Not Have To." Both are written by Jason Horowitz, the Rome bureau chief, who is a journalistic hit man specializing in tabloid  smears. He held the "Get Bernie" portfolio in 2016. After Sunday, The Times will probably send Horowitz to the next election hot spot so he can peddle his fictions and innuendo.

Horowitz is tarring M5S as corrupt, opaque and a Russian cutout; the young people who are the base of the party's support, shameful dupes, much like the kids who swelled Bernie's ranks.

It is fascinating to bear witness to the propaganda organs of the Democratic center as it implodes. The only argument on offer is an omniscient Russian meddling. There is never any substantive discussion of why the Socialists in France, why the SPD in Germany, why Matteo Renzi's Democratic Party in Italy are performing worse than ever before. The only reason given is the evil Putin somehow pulling strings from the Kremlin. Call it the present-day version of the stab-in-the-back myth.

It is the same in the United States. When you talk to a stalwart Democratic she will talk first of Russian meddling. There is no positive vision of the future. Even "Medicare For All" is dismissed with the exasperated question, "Well, who is going to pay for it?"

The Democratic center, mainstream neoliberalism, is at its end. What comes next -- unless new parties like M5S or a Momentum-captured Labour catch on -- is fascism.

Italian General Election + Results of SPD Groko Vote This Sunday

Italians hold their general election on Sunday. The Five Star Movement (M5S) has been leading in the polls all year. The problem is this lead likely won't translate into a parliamentary majority. Conventional wisdom is that the Berulsconi-led right-wing coalition, which includes the Northern League, will form a government. But it is unclear to me that they will have the votes.

One thing seems certain. Matteo Renzi and the establishment Democratic Party will do poorly. This continues the trend across Europe where the mainstream political left is collapsing. U.S. Democrats should take note.

Also on Sunday results of a membership vote will be announced in Germany as to whether the Social Democratic Party (SPD) should renew its grand coalition (Groko) with the Christian Democrats.

Given the stakes of both the Italian election and SPD Groko referendum the lack of coverage in "the newspaper of record" has been noteworthy. Peter Goodman wrote a good story for the business page the other day, "Italy Is Having an Election. Most Italians Are Too Depressed to Care." The elements of malaise he describes -- youth unemployment; long-term joblessness; lean, capital-intensive production; political apathy -- could be applied to any Western nation.

One thing can be gleaned from NYT's sparse Italian reporting, even from the sneering Jason Horowitz -- M5S is on the rise.

The Times doesn't have a Macron to fluff in Italy or Germany. So rather than really report on what is happening -- we live in an age when there is remarkable broad-based disdain for the governing political parties and said parties are collapsing -- the Times mostly prefers to say nothing.

Which says a lot.

Say Goodbye to the Unipolar World: The End of Neoliberal Orthodoxy as We Know It

This Sunday two big votes will take place in Europe: Italy's constitutional referendum, and a do-over in Austria of last spring's presidential election. A "no" vote in Italy combined with a win by Norbert Hofer and his far-right Freedom Party will provide further proof of a rising populist tide in Europe that is swamping the old, almost completely discredited governing neoliberal orthodoxy.

An editorial yesterday in The New York Times, "Italy's Turn to Vote," pleads with Renzi to stay on as prime minister (he has promised to resign) if the constitutional referendum fails. The failure of the referendum -- which basically does away with the senate, making it easier to ram through structural adjustments in labor and tax law (the standard neoliberal "Washington Consensus" playbook) -- appears to be inevitable.

A piece in The Guardian yesterday, "Italy referendum: all you need to know about Renzi's crunch vote," summarizes:

You seem to be predicting that Renzi is going to lose. Are you sure?No. But almost all of the available polls show Renzi is behind and the country seems to be fed up with him. You never know, though: a whole host of factors, including a simmering scandal in Sicily about M5S, could diminish turnout for no and hand Renzi a victory. He could also get overwhelming support from up to 4 million Italian voters abroad, which could tip the scales in his favour in a close election. It just seems unlikely.

If he does lose and there is a new election, would M5S win?
There is a strong chance M5S could win based on current polls, but it is not a certainty. The party’s lack of experience could give Italians pause. One senator, Francesco Palermo, thinks that whoever wins – including M5S – would be far to the right of Renzi, putting much more pressure on Italy’s relationship with the EU, and probably leading to big changes in the country’s handling of the migration crisis.

Some of Italy’s biggest banks are in bad shape. How will the referendum affect the banking sector?There is increasing alarm that the political upheaval created by a potential no victory would disrupt plans to recapitalise Italy’s most troubled banks, including Banca Monte dei Paschi of Siena. Shares in Italy’s beleaguered banking sector are down more than 20% since Brexit, in large part because investors are worried about the outcome.

The failure of Renzi is an important moment in the collapse of neoliberalism. Renzi was once the great young hope to reanimate hoary neoliberal shibboleths such as "creative destruction," "competitiveness," etc. (See the Council of Foreign Relation's "A Conversation with Matteo Renzi.") If Renzi loses Sunday, coming at the same time that a lamed Obama vacates the White House and that Justin Trudeau has just approved the expansion of a massive pipeline to transport Alberta tar sands to British Columbia, there will be no telegenic pitchman left to front the neoliberal orthodoxy.

What is to be done?

The elite are desperate. They see no path forward. Europe tucked firmly under the wing of the American eagle is how U.S. global hegemony works. Brexit is a slow-motion crisis for Pax Americana; likewise Trump. The New McCarythism and wails about "fake news" are a "back to the future" Hail Mary to keep the revolting masses fenced in on the neoliberal reservation while the media monopoly hemorrhages ad revenue month in and month out. (The only business model that makes sense for the big daily newspapers is government subsidy.)

The bottom will drop out this spring in France. In a way it already has. The Socialists, who hold their presidential primary in January, are kaput. This means that with the nomination of Francois Fillon last Sunday, the runoff will almost certainly feature two candidates -- Fillon and Marine Le Pen -- who favor ending trade sanctions against Russia.

The U.S. engineered coup in Kiev, part of a strategy to block Germany's Ostpolitik integration of Russian into Europe, can be declared a failure. Say goodbye to the unipolar world.

Whose Scalp Next? Italy's Neoliberal Matinee Idol, Matteo Renzi

The Italian constitutional referendum is in a little more than three weeks, December 6. Italy's PM, Matteo Renzi, has vowed to resign if it fails to pass. He has since hedged on that. Renzi wants to centralize power to make it easier to implement labor market reforms and other neoliberal delicacies. His impending defeat will be another body blow to the rapidly disintegrating mainstream political order: This is Crispian Balmer's "Trump's triumph puts Italy's Renzi in difficult position," published yesterday by Reuters:

Donald Trump's unexpected victory in the U.S. presidential election is likely to make it even harder for Italian Prime Minister Matteo Renzi to win a crucial referendum on constitutional reform set for December.

Renzi was one of the few world leaders to publicly endorse Hillary Clinton and Trump's triumph has not only put the Italian premier in a difficult diplomatic position, it has also underlined the rise of anti-elite sentiment around the world.

"This factor is weighing against Renzi because at the moment for many Italians he represents the establishment," said Roberto D'Alimonte, politics professor at Luiss University in Rome. 

Renzi has said he will resign if he loses next month's ballot and was already facing fierce headwinds, with all opposition parties pitted against him and almost every opinion poll over the past two months showing the 'No' camp ahead.

However, a large number of Italians remain undecided, helping to fuel government confidence that the 'Yes' vote will eventually win and stave off a renewed bout of political uncertainty that is feared by the financial markets.

"The Trump win does show that populism continues in 2016 and suggests a 'no' vote in the Italian referendum could be stronger than we assumed," David Zahn, the head of European fixed income at U.S. fund manager Franklin Templeton, told Reuters.

The spread between Italian and German 10-year benchmark bonds was up 7.8 basis points at 1200 GMT at 154.05, the highest level since June when the closely watched gap jumped in the wake of Britain's vote to leave the European Union. 

The constitutional reform proposes drastically curbing the role of the upper house Senate, a move that Renzi says will simplify decision-making and ensure stable government. Opponents say it will make the legislative process more complicated and reduce checks and balances.

"WE ARE THE BARBARIANS!"

Italy's anti-establishment 5-Star Movement currently heads the opinion polls and its founder, Beppe Grillo, hailed Trump's victory, seeing it as a vindication of his own maverick stance.

"It is those who dare, the obstinate, the barbarians who will take the world forward. We are the barbarians! The real idiots, populists and demagogues are the journalists and the establishment intellectuals," Grillo wrote on his blog.

Jumping on the U.S. election bandwagon with an eye to the forthcoming referendum, former prime minister Silvio Berlusconi's Forza Italia (Go Italy!) party put out Tweets saying "In America, they voted NO".

The group's parliamentary leader Renato Brunetta called on Renzi to resign immediately and not even wait until Dec. 4, saying his pro-Clinton stance had weakened Italy's standing.

"From this day forward Matteo Renzi is politically finished, he is a dead man walking," Brunetta said in a statement. "No other European country sided with one of the two contenders like Italy did. Now Renzi must reap the consequences and take responsibility for his bad choices."

Renzi himself offered Trump his congratulations and said Italy's relations with the United States, its NATO ally, were "solid". 

The new U.S. president is due to visit Italy next May when the country hosts the 2017 summit of Group of Seven leaders.

Why I Think Brexit Will Win

Polls are not providing much insight into whether voters will opt for a Brexit tomorrow. The Leave campaign's surge was upended last week with the slaughter of Labour MP Jo Cox by a deranged constituent outside a Leeds library.

If an edge exists, the Leave camp still has it, but it is modest. And if you are one of those who like to "follow the money," then you might want to pay attention to the jump in exchange transactions. Britons are unloading pounds out of fear that the currency will take a significant hit when Brexit triumphs.

My own non-rigorous interpretation gives great weight to the big win for the Five Star Movement in Italy's mayoral election Sunday. Thirty-seven-year-old beauty Virginia Raggi is the first woman and the first member of the Five Star Movement (M5S) to be Mayor of Rome. A super-historic achievement (she won over two-thirds of the vote!) and a huge blow to politics as usual as personified by Italian prime minister Matteo Renzi.

Think of Renzi as a Paul Ryan of the center-left. Someone that party leaders believe breathes new life into their corpse-like organization. It is hard to think of a Democrat -- young, confident, telegenic -- in the United States who is a peer to Renzi. Julian Castro? Not even close. For a while Renzi seemed to have a little pep in his step. He was able to achieve a rollback of Italian labor law (of the type Hollande's Socialists are presently attempting with the El Khomri law). But because of the success of Raggi in Rome and another M5S upset in Turin, Renzi appears to be a politician well past his sell-by date.

Granted, Italy is not the UK. But if voters in Rome overwhelming support a non-traditional leader --and M5S advocates an Itexit -- I think it means something, and it augurs ill for the status quo.

Also, I don't think Juncker lecturing Britons that "out is out" is going to win any votes for the Remain campaign. And there is the hope that the UK will lead the way with the right choice as Parliament did when it voted against bombing Syria in the summer of 2013.

Five Star Movement + How Much Time Left for the Dominant Paradigm, Six Years or Six Decades?

With Hillary being feted this morning as the likely Democratic nominee for president, it might help to cast a glance elsewhere for hope. Good news comes from Italy.  The Five Star Movement's mayoral candidate in Rome, 37-year-old lawyer Virginia Raggi, is polling ahead after the first round of voting.

At about the same time Syriza was rising in Greece, the Five Star Movement (M5S) was on the ascent in Italy. Led by comedian and blogger Beppe Grillo, the new party seemed like the best hope in 2013 for exploding the Brussels hive mind.

Then Syriza captivated the media and the political left; this, combined with M5S's underwhelming showing in 2014 elections for the European Parliament, moved the party off the front burner.

Now -- after the spectacular failure of Syriza, the diffident performance of Spain's Podemos, the rise of right-wing populism in Europe (Austria's Freedom Party is challenging May's election loss), the triumph of the corporate media behemoth over Bernie Sanders' millennials, and many other disappointments -- besides the Scottish National Party, there seems little to celebrate in terms of elections in the West, other than the Five Star Movement. The Brexit vote coming up is a big deal. But the left is split on whether to stay in the EU or go. (I say go.)

I ask people I know who pay attention to the news the following question -- "How much longer can the dominant neoliberal paradigm last?" Everyone so far has replied, "A lot longer." Tariq Ali agrees.

The basic question as I frame it is "Six or 60?" Does the corporate-dominated predatory capitalist system which is vacuuming up all the wealth to the top of the pyramid and destroying the planet survive for six years, say early to middle 2020s, or six decades, at which time many agree that the effects of climate change -- sea-level rise and acidifying oceans -- will demand a huge, paradigm-shifting coordinated response?

The reason I favor the near-term shift is I can't see how the present system lasts beyond four years. First off, the party system throughout the West is collapsing. Granted, charismatic, rejuvenating leadership championing popular policies could rise from within the discredited mainstream Christian Democrats, Labourites, Tories, Socialists and Tea Party Republicans, but there is zero evidence for this. So sooner rather than later a minor party will rise to the top and lead, successfully or not, in such a way that it will create a fissure in the dominant paradigm. If not a Brexit on June 23, then Marine Le Pen in 2017 or Alternative for Germany. An EU subservient to U.S. global hegemony becomes much harder to imagine.

Secondly, the U.S.-led warfare state cannot keep multiplying and maintaining its many theaters of conflict. The fall of Saigon led to an adjustment and correction in the way that the U.S. conducted war. There was a decade-plus pause and reset. Does the fall of Kabul lead to the same type of timeout? Unlikely. But there is a limit to what the U.S. can manage in the way of mayhem. Already the blow black from its wars in the Middle East  and North Africa is diminishing support for the major parties of Europe.

Below is a helpful primer on the Five Star Movement that appeared a couple days ago on the Europe Online web site. Having kept an eye out for M5S over the last several years, I find it accurate:

No laughing matter: Italy's comedian-led Five Star Movement

Rome (dpa) - Italy‘s Five Star Movement (M5S) is one of the most successful anti-establishment parties in Europe, whose main rallying cries are clean politics, direct democracy, euroscepticism and basic income support for all.

"We are normal citizens like you, and this normality is scary" for the establishment, Virginia Raggi, who topped a first round of elections for the Rome mayoralty on Sunday, said at her closing campaign rally last week.

Founded in 2009 by Beppe Grillo, a stand-up comedian, and Gianroberto Casaleggio, a shadowy internet consultant who died in April, the M5S shot to national prominence after taking a surprise 25 per cent of the votes in the 2013 general elections.

The movement defies left-right categorizations, and shuns alliances with other parties, which it sees as fundamentally corrupt. It is also critical of banks, big corporations, free trade agreements and wants a referendum on Italy‘s exit from the eurozone.

The movement‘s defining characteristic is its reliance on internet consultations among its supporters to select its candidates and political priorities, which are communicated online via Grillo‘s blog.

But critics have accused Grillo and Casaleggio of using the system arbitrarily and quashing internal dissent. Out of the 163 M5S lawmakers elected in 2013, some 37 have either been expelled or have walked out of the party.

In 2014, the M5S hoped for an electoral breakthrough in elections for the European Parliament, which did not come. It won 21 per cent of the vote, against a record 41 per cent for the ruling Democratic Party (PD).

In this month‘s local elections, the M5S led polls in Rome and came a strong second in Turin, but fared poorly in other big cities like Milan and Naples, suggesting that it still has some way to go before building a strong national base.

In the EU assembly, M5S lawmakers have formed the Europe of Freedom and Direct Democracy group with the British eurosceptic UK Independence Party (UKIP) and the German anti-immigration Alternative for Germany (AfD) party.

The death of Casaleggio, who acted as a behind-the-scenes strategist, has raised questions about the future of M5S, but plans to prepare a younger cadre of party members to take over the leadership have been under way for some time.

After saying in 2014 that he was "a bit tired," Grillo has cut down on campaigning, giving more space to the M5S‘ rising stars, such as lawmakers Alessandro Di Battista and Luigi Di Maio. Tellingly, the 67-year-old comic stayed out of Raggi‘s campaign finale in Rome.

Di Maio, a 29-year-old deputy speaker of the lower house of parliament, is seen as the most likely M5S prime ministerial candidate for the next general elections, due within the next two years. Grillo has always refused to run for office.

We Need New Political Formations

Today's Economic Scene column by Eduardo Porter, "From Mexico, Some Lessons for Europe," looks at Europe's allegiance to austerity and compares it to Mexico's attempt to deal with its sovereign debt problems in the 1980s. Porter was a college student in Mexico City at the time. 

Tweak a few of the details and Mexico in the 1980s looks a lot like most Southern European countries today. In Mexico’s case, runaway government spending in the 1970s, fueled by high oil prices and greased by foreign debt, threatened to bankrupt the country after the Fed sharply raised interest rates to curb rampant inflation in the United States, increasing Mexico’s interest payments even as oil prices crashed to earth. 

Similarly, money poured into Spain and Greece when investors persuaded themselves that the bonds of all members of the euro zone should be as safe as Germany’s, the region’s most creditworthy country. In Greece, this allowed a government spending binge. In Spain it ignited a housing bubble. Both countries were left with an unbearable burden when the world economy hit a wall, creditors took flight and the money stopped.

In the five-plus years it took me to get a degree (Mexican degrees take longer) the Mexican economy contracted about 2 percent. By the time I got my graduate degree two years later, gross domestic product per person was 8 percent less than it was in 1982. Yet despite the enforced austerity, Mexico’s foreign debt in 1988 still amounted to 56.5 percent of Mexico’s economic output, more than it had six years before. 

This must sound familiar to Europe’s unemployed. If anything it’s far worse there. The Greek economy has shrunk more than a fifth over the last five years. Government debt amounts to about 170 percent of the economy; it was 100 percent when the crisis started. The economies of Ireland, Portugal, Spain and Italy are smaller, too, than they were five years ago. Their debt burden is heavier. And still, European leaders insist that more of the same must be the solution.

Porter says that Brady Bonds helped solve the Latin America debt crisis, but then he questions the applicability of a similar solution in Europe's case:

What can Europe learn from this experience? Proponents of austerity will probably note that the harsh years planted some of the seeds of Mexico’s recovery. Bankers will remark that Mexico’s absolute debt reduction package was small — much less than the 50 percent or so already granted to Greece. Economists will note that Mexico had a degree of freedom that no member of the euro area has: it could devalue its currency to gain export competitiveness. 

Nonetheless, the Brady plan was a crucial ingredient. It not only reduced Mexico’s interest costs, it also produced a jolt of confidence that pushed down domestic interest rates and buoyed the peso — reducing the burden of foreign debt. It prompted flight capital to return to the country and set off an investment boom.

The cold war, Porter argues, was a critical ingredient in getting the nations to agree to debt restructuring. Leaders in the West were afraid of Mexico tilting socialist.

The only hope of that we have today is for a genuine transformation in our politics. Occupy Wall Street for a month or two in the fall of 2011 fulfilled this hope. Political parties are captured by business-as-usual money; we need a clean sweep. Then, as a result of a police crackdown and the presidential election of 2012, Occupy evaporated seemingly overnight. Now, from what I can tell, our best hope for a political reboot is Italy's Five Star Movement.

Rachel Donadio has a story this morning, "Upstart Party in Italy ‘Occupies’ a Parliament That Is Already Paralyzed," about the continuing gridlock in Rome. The parties can't form a government and soon there will be an election to select a new president:

The pressure is rising because the seven-year term of Italy’s 87-year-old president, Giorgio Napolitano, ends in May, and his replacement must be elected with a two-thirds majority of the same divided Parliament.

Italy’s Constitution forbids a president to dissolve Parliament and call new elections in the final six months of his term. 

The presidency has traditionally been a largely symbolic office, but Mr. Napolitano has become a bulwark against political instability. Last month, he named a committee of 10 politicians, experts and technocrats and asked it to produce a list of issues on which the squabbling parties could find consensus. They are expected to issue their findings this week.

On Tuesday, some of the Five Star Movement lawmakers “occupied” the Senate, meaning they remained in their seats after the day’s session. The group said they would stay until midnight to protest a decision by the presidents of the Lower House and Senate not to form permanent committees until Parliament forms a government. 

They passed the time by reading aloud from a legal code. 

Mr. Grillo, who does not serve in Parliament but runs the Five Star Movement with what critics say is an autocratic hand, accused the two parliamentary leaders of having carried out “a coup” by blocking the creation of committees.

The last paragraph of Donadio's story is not encouraging:

Mr. Bersani [leader of the center-left Democratic Party] has so far failed in his efforts to try to persuade some of the Five Star lawmakers, all of them first-time politicians, to support a center-left coalition. But as time passes, the movement appears to be splintering and may not vote as a bloc.

New political formations are hard to hold together. Grillo is smart to keep the Five Star Movement in motion doing actions like its occupation of the Senate. My experience with the Green Party coming out of the 2000 presidential election is that we did not do enough actions to keep people focused and engaged. We spent our time in a tedious bylaws revision process which lasted months, created division and killed any flame. So far the Five Star Movement seems to be avoiding these mistakes. The best thing for the Five Star Movement would be new elections as soon as possible.

Austerity in Italy and Rise of the Five Star Movement

Austerity's destructiveness is brightly illuminated in today's story, "On the Brink in Italy," by Liz Alderman; usually a faithful apologist for neoliberalism, her devotion is beginning to fray at the edges. Alderman looks at Temeca, a woodworking factory in Guidonia owned by the Tedeschi family, to see how austerity, implemented by Mario Monti (trounced in the recent elections), is working for the Italian people. The answer? It's not:

Since a government austerity plan designed to shield Italy from Europe’s debt crisis took hold last year, the economy has tumbled into one of worst recessions of any euro zone country, and Mr. Tedeschi’s orders have all but dried up. His company, Temeca, is still in business. For now. 

But among Italy’s estimated six million companies, businesses of all sizes have been going belly up at the rate of 1,000 a day over the last year, especially among the small and midsize companies that represent the backbone of Italy’s 1.5 trillion euro, or $2 trillion, economy.

One in two small companies cannot pay its employees on time, according to CGIA di Mestre, a research institute. With layoffs surging, unemployment rose to 11.7 percent in January. Youth unemployment has jumped to 38.7 percent. 

The austerity program was intended to reduce the risk of a debt crisis and ensure the backing of the European Central Bank, but instead it left the country with no growth. And without growth, Italy will have a harder time paying down its 2 trillion euros ($2.6 trillion) in debt, one of the largest debt burdens in the euro zone.

Tedeschi was forced to lay off workers:

“When I had to fire those people, I cried,” he said, sitting in his small office under a picture of Mother Teresa as his wife, Annarita Neroni, and his son, Lorenzo, looked on. Mr. Tedeschi said several members of a local trade group took their own lives last year when they could no longer maintain their business. 

“This is a moment where if you stay alone in this situation,” he said, “you will wind up by shooting yourself.” 

Mr. Tedeschi’s wife said the family stopped drawing salaries more than a year ago to make payroll for the remaining workers. Disillusioned with the economy’s rapid erosion under Mr. Monti, the family voted for the anti-establishment Five Star movement, led by the comedian turned activist Beppe Grillo, in the February elections, even though they knew it might lead to chaos. 

“It’s a form of protest,” Lorenzo Tedeschi said, adding that he had been drawn by Mr. Grillo’s plan to cut billions of euros in corruption and wasteful spending. “We need to start from scratch in this country, and he gives us hope that there is a chance to make things equal.”

It's been a great story so far. Alderman has marshaled the facts and woven them in a compelling way with the real-life story of the Tedeschi family business. But with the mention of Grillo she can't contain herself. Responding to Lorenzo Tedeschi's sentiment that a vote for the Five Star Movement is a vote for a chance at equality, Alderman replies,

That may be tough, given that the discord Mr. Grillo created is likely to delay a recovery. Few people believe that official forecasts of a return to mild growth this year will materialize.

As if Grillo created the discord; as if things were proceeding smoothly until he arrived on the scene; and now, well, there goes the recovery that the heroic Monti steadfastly engineered. Why can't people accept destitution and marginalization if, as European Union president Jose Manuel Barroso asserts in a letter to EU leaders, "Steadfast implementation of reforms is beginning to deliver results in terms of current accounts and regaining competitiveness." Can't they see that a sense of self-worth and a modicum of personal security are tangential to the great god Competitiveness?

"Federal Reserve Has Done a Good Job Lifting the Market"

Read Nelson Schwartz's frontpage article today, "Recovery in U.S. Is Lifting Profits, but Not Adding Jobs." After quoting a Bank of America Merrill Lynch executive who dismisses the likely impact of the sequester on corporate profits by saying, "the market wants more austerity," Schwartz outlines our new, post-meltdown economy:

As a percentage of national income, corporate profits stood at 14.2 percent in the third quarter of 2012, the largest share at any time since 1950, while the portion of income that went to employees was 61.7 percent, near its lowest point since 1966. In recent years, the shift has accelerated during the slow recovery that followed the financial crisis and ensuing recession of 2008 and 2009, said Dean Maki, chief United States economist at Barclays. 

Corporate earnings have risen at an annualized rate of 20.1 percent since the end of 2008, he said, but disposable income inched ahead by 1.4 percent annually over the same period, after adjusting for inflation. 

“There hasn’t been a period in the last 50 years where these trends have been so pronounced,” Mr. Maki said.

Businesses are socking away productivity gains as profit. Workers are laid off rather than seeing a wage bump. Check out this naked capitalism post from Saturday, a Real News Network interview with Dr. Heiner Flassbeck of Hamburg University. Flassbeck is talking about the negative impact of the sequester on employment and wages. But what really struck me were the graphs accompanying the interview showing the huge productivity gains over the years with an almost complete stagnation in wages. The promise of twentieth century capitalism was that workers would share in productivity gains. This promise has been repeatedly broken for the last three decades. Capitalism is a failure for the 99%.

The last three paragraphs of his story Schwartz explains the phenomenon of the skyrocketing stock market:

The Federal Reserve has also played a crucial role in propelling the stock market higher, economists and strategists say, even if that was not the intent of policy makers. The Fed has made reducing unemployment a top priority, but in practice its policy of keeping rates very low and buying up the safest assets to stimulate the economy means investors are willing to take on more risk in search of better returns, hence the buoyancy on Wall Street amid the austerity in Washington and gloom on Main Street. 

Of the broader market’s 13 percent rise in 2012, about half was a result of the Fed’s actions, Mr. Harris of Bank of America Merrill Lynch estimates.

“The Federal Reserve has done a good job stimulating financial conditions and lifting the market,” he said. “It’s been less successful in stimulating job growth.”

For a dire prediction of what will happen in the next couple of months check out Chris Martenson's post on the Counterpunch web site this past weekend, "Warning: Stocks Likely to Crater from Here":

The summary here is that if stocks do indeed retreat from here, a triple-top failure will deliver quite a punishing blow to the current efforts to repair the public’s trust in the stock market as a place to send their hard-earned savings to grow. It would be quite difficult to engineer a run at a fourth top, given the importance of retail participation in providing fuel for the rise of stocks – especially given that the boomers are retiring at the rate of 10,000 per day and drawing upon their investments instead of adding to them.

The younger generation(s) have been the main victims of the high unemployment and general wage stagnation that have been the hallmarks of the Great Recession. It is not likely that they will be able to save and invest at a rate equal to the boomer’s withdrawals, creating one more equity headwind for the Fed to overcome.

I think this is right. I think if there is a significant drop in the market then due to structural issues of our new economy -- unemployment, massive student debt, boomers leaving the workforce -- it will be difficult to mount another quick run to the top. I think that a significant drop in the market will be sparked when a large nation, like Italy, leaves the eurozone. If you read Liz Alderman and Elisabetta Povoledo's frontpage article on Beppe Grillo and his Five Star Movement, I think you'll come away, as I did, thinking that Grillo is a formidable politician. The question is does he really want Italy to scrap the euro. I think he does; I think he sees that it's the only way out of the widening gyre of Brussels-Berlin mandated austerity.

Austerity Suffers Defeat at the Polls in Italy

It's hard to believe that the results of Italy's election yesterday caused a 200-point drop in the Dow, as is being reported in a story today by Rachel Donadio, "Split Vote in Italy Brings Political Deadlock." This outcome, underperformance by the Democratic Party of Pier Luigi Bersani along with continuing support for Berlusconi's People of Liberty Party, has been predicted for months. The wild card was the Five Star Movement of comedian (and blogger!) Beppe Grillo. And, as Donadio writes,

The outstanding success of the elections was the Five-Star Movement of comedian Beppe Grillo, which led a grass-roots and Web-based campaign and won more votes than any other party, with about 25 percent of the ballot. The group drew support from a powerful protest vote as Italians from both right and left — and the wealthier north and poorer south — were drawn to Mr. Grillo’s opposition to austerity measures and appeal to oust the existing political order. It has indicated that it is not inclined to form a governing alliance with Mr. Bersani or Mr. Berlusconi.

The big loser? Mario Monti, who Paul Krugman referred to in his column yesterday, "Austerity, Italian-Style," as "the proconsul installed by Germany to enforce fiscal austerity on an already ailing economy." According to Donadio,

The election offered a stinging defeat for Mr. Monti, the caretaker prime minister, a newly minted politician whose lackluster civic movement appeared to win around 10 percent in both houses. “Grillo had a devastating success; the rest of the situation is very unclear,” said Stefano Folli, a political columnist for the daily business newspaper Il Sole 24 Ore. 

“No doubt Italy has an imperfect political culture, but this election, I think, is the logical consequence of pursuing policies that have dramatically worsened the economic and social picture in Italy,” said Simon Tilford, the chief economist of the Center for European Reform, a London research institute. 

“People have been warning that if they adhere to this policy there will be a political cost, there will be backlash,” he added. “It couldn’t have taken place in a more pivotal country.”

We don't often get an outbreak of democracy. And without a doubt the grand coalition of Bersani and Berlusconi will be a disappointment. But Beppe Grillo's political movement is a hopeful development. Austerity will not be beaten back with one election, but it lost a battle yesterday in Italy.