The results of the Italian Constitutional referendum and the sudden announcement of prime minister Renzi’s resignation are sending shockwaves throughout Europe. A victory for the No vote was expected, but the scale of the defeat for Renzi, with almost 60 percent supporting No, goes far beyond what had been anticipated by all exit polls.
The referendum campaign has polarised the country enormously over the past few weeks and the level of participation (almost 70 percent) shows how a large section of the population has seized upon the opportunity to express their discontent against the government and the system by casting a No vote.
Renzi is personally responsible of this outcome by making his position as Prime Minister dependent on the outcome of the referendum. He initially thought that his gamble would pay off, but grossly underestimated the real level of discontent that has been building up among the Italian masses for quite some time.
Renzi is just the latest figure (and he will not be the last) to have joined previous illustrious victims such as David Cameron and Hillary Clinton in what Wolfgang Münchau has described in the Financial Time as “The elite’s Marie Antoinette moment”.
Münchau notes that:
“Some revolutions could have been avoided if the old guard had only refrained from provocation. There is no proof of a ‘let them eat cake’ incident. But this is the kind of thing Marie Antoinette could have said. It rings true. The Bourbons were hard to beat as the quintessential out-of-touch establishment.
“They have competition now.”
Most bourgeois commentators briefly rejoiced earlier on Sunday at the defeat of the extreme right-wing FPO candidate Norbert Hofer in the Austrian presidential elections. They concluded that the shocking result of the Brexit vote and Trump’s election had taught millions of people in Europe a lesson: “Better the devil you know”. They regarded the Austrian result as a possible turning point in the tide of rising instability. Such hopes were dashed within only a few hours by the political earthquake in Italy.
The same commentators then rushed to reassure nervous investors and international capitalists that the referendum results and Renzi’s departure do not imply an immediate full-scale crisis of Italy, nor the European Union.
After all, the referendum was just about a constitutional reform, they said, and Renzi’s resignation does not automatically mean early elections. Some have even been as bold to state that the Referendum result is in reality a vote for stability, a “conservative” opposition to changing the constitution.
The figure of young voters (18 to 34 years old) supporting the No vote - over 80 percent - suggests more caution is needed in such judgements. As long as the immediate future is concerned, these commentators may be quite right. However, this exercise in self-reassurance does not bear further scrutiny when one takes into account the deeper reasons for this upheaval in Italian politics, and how the crisis in the country can further escalate in the coming months.
According to the Italian political system, Renzi’s decision to resign will not immediately trigger early elections. President of the Republic, Mattarella, will try to form a new government able to win a majority support in the Italian parliaments (the Camera and Senato). It is unlikely that a majority could hold water without the support of Renzi’s Democratic Party (PD), but an agreement on the formation of a “technical” government that could pave the way to new elections may be reached.
The special crisis of Italian capitalism
After Greece, Italy has been the worst performing country in Europe in the aftermath of the 2008 crisis. After eight years of recession, stagnation, and short spells of sluggish growth, Italy’s GDP levels are back to 1999 levels.
The roots of this crisis are to be found in the competitiveness gap with stronger capitalist countries in Europe, especially Germany. In the past Italian capitalism would find a temporary boost by devaluating the currency, but this scenario has become impossible after joining the euro single currency. The only way left to the Italian capitalists in order to regain ground would have been that of unleashing a vicious attack on the working conditions, rights and wages of the Italian working class – which they did – but too slowly and too late for it to be effective.
The lack of competitiveness explains why, when Italy was hit by the crisis in 2008-2009, manufacturing activity shrunk by 26 percent. The cost of the crisis for the working class has been extremely severe with official unemployment levels of 11.5 percent, and youth unemployment approaching the levels of Spain and Greece, around 38-39 percent. Families have been hit hard, 97 percent of whom have seen their income stagnate or cut over a ten-year period.
These figures are much worse in southern Italy, which is increasingly becoming a ticking social time-bomb.
On top of this, decades of austerity policies and cuts in social spending have failed to keep the rising public debt under control. The public-debt-to-GDP ratio reached the historical peak of 132.7 percent in 2015 (it was just about 100 percent in 2007).
After the shock of the Brexit referendum, stocks in Italian banks were seriously affected by international speculation. This was not an accident.
The Italian banking system is in a deep crisis and risks being submerged under a rising tide of non-performing loans as the crisis hits hard working class families, the petty bourgeoisie and small businesses. The level of toxic debts rose from 42 billion to 170 billion euros between 2008 and 2014. However, in the past two years alone that figure doubled to 370 billion euros.
Several important banks are on the verge of bankruptcy (or technically bankrupt, like Monte dei Paschi) or quickly reaching that point, among which are the giants Unicredit and Banca Intesa. It should not come as a surprise that Monday was a field day for Italian banking shares in the stock market, with a dip of over four percent.
The present political and institutional instability will have serious consequences in the real economy. Yet even in the short term it could represent the tipping point of an even more serious crisis of the banking system.
Renzi’s resignation speech and the political consequences
The key to this crisis is to be found in the political blindness of Renzi himself, who has reportedly told his close collaborators that he is shocked by the level of resentment against him that the result revealed.
His 1,000 days as Prime Minister have been characterised by extensive attacks on the condition of the Italian working class and counter-reforms such as the Jobs Act (Labour Law), as well as the counter-reform against education euphemistically named “La buona scuola (The good school)”.
Renzi held his speech just one hour after the ballots closed and early voting results had begun to come in. It was a belligerent speech, taking responsibility for the defeat - but it also sounded like an election speech. He is clearly banking on the possibility that it will be very difficult to form a government without the involvement or the external support of the PD.
It is possible that Renzi will be able to retain the leadership of his party in spite of internal opposition from several high profile figures, headed by former Prime Minister Massimo D’Alema.
The rising support for the Five Star Movement of Beppe Grillo, which recently won the mayoral elections in the important cities of Rome and Turin, and could well rise to become the main party should there be early elections, adds more uncertainty to the situation.
Grillo’s promise to hold a referendum on Italian membership of the EU - in a country where austerity policies and cuts have been constantly justified over the past two decades as necessary measures to be part of the European Union - adds more combustible material to the situation.
The crisis of Italian capitalism is seriously risking spiralling out of the control of the Italian ruling class.
The Constitutional referendum result is yet another sign that the crisis of capitalism and the austerity policies carried out by governments all over Europe for decades have eroded the confidence of the mass of the population in the establishment and undermined the political stability of each and every country.
No countries can consider themselves immune from this process: Greece, Spain, Portugal, Britain; but also core EU countries like Italy, Austria, France and Germany – all are heavily affected. The economic crisis is now turning into a systemic crisis and it manifests itself as a broad and deep rejection of the system, a crisis of the regime. Such a development carries within it revolutionary implications.