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."