Inside Story

Italy: the bel paese that lost its way

Life is still good for many Italians, but bad decisions are deepening the north–south divide

Tim Colebatch 2 October 2017 3555 words

Life was good: Gregory Peck, Audrey Hepburn and Eddie Albert at Cafe Rocca in Roman Holiday, 1953. Classic Film/Flickr

Italy is not what it was. It is still the bel paese (beautiful country), as Dante and Petrarch christened it: a land of sun and sea, noble mountains and productive plains, and inventive people who have created stunning cities and lives full of delights. But much has gone wrong over the past twenty-five years, and there is no consensus about how to put it right.

For decades, life went well. The second world war had left the country devastated and poverty widespread, but Italy generated a sustained economic boom, marrying its design and engineering skills to make it one of the world’s great manufacturing countries. By 1990, the International Monetary Fund estimates, Italy had overtaken Britain and France in GDP per head, and was more or less level with Australia and Germany. Outside the Mezzogiorno, Italy’s Deep South, where crime gangs ruled, unemployment was low and investment was high. They were the years of la dolce vita.

More than that: while the division between north and south was stark, Italy was a land of one people, united by common values: a universal Catholicism, strong family ties, a love of fast cars, soccer, espressos and vino, and a strict gender division that led its women to develop their superb casalinga (home-made) cuisine. Italian food and drink was imitated all over the world, and for most Italians, it was a pretty good place to live.

Italian politics was like a soap opera, but it didn’t matter. Constant internal machinations and coups meant that governments usually lasted less than a year: between 1945 and 2001, a total of fifty-seven governments held office. Yet, as some observed, there was really only one government — officially led by a Christian Democrat or one of that party’s allies — and the bureaucracy ran the show. The alternative political force, the Communist Party, was democratic and bore no allegiance to the Soviet Union. In Rome, it was always in opposition, but in regions, and in cities like Bologna, it ran governments often admired as clean and creative.

Fast forward twenty-five years, and Italy is no longer such a good place to live. Economically, it has suffered a quarter-century of stagnation. Many of the industries built up in the postwar period have closed their doors, priced out by lower-wage rivals in China or Eastern Europe. A falling population has reduced construction activity. No Western country, not even Greece, has seen less economic growth for so long. According to the IMF, Italian GDP per head last year was barely higher than it was twenty years ago.

Unemployment is 11.2 per cent nationally, and 20 per cent in the south. Those figures are slowly improving as Europe’s recovery gains momentum, but almost three million Italians are still unemployed, and many others have had to accept part-time work. And when the country as a whole is no better off than twenty years ago, millions of its people have inevitably become worse off.

There are some good reasons for that. Germany and Italy enjoyed similar growth during the postwar boom, but diverged sharply after 1990. Germany specialised in heavy engineering — cars, chemicals, pharmaceuticals, and machinery and equipment of all kinds — which have proved remarkably resilient to Chinese competition. Italy’s manufacturing strength was in clothing and textiles, and that couldn’t last. Its fashion houses still have their designers and head offices in Italy, but the labour-intensive manufacturing is done elsewhere.

The long boom saw Italy in a demographic sweet spot: plenty of young and middle-aged workers, relatively few retirees. Now, the reverse is true. Last year, excluding temporary residents, 609,000 Italians died but only 404,000 new ones were born. Women on average bear only 1.4 children in their lifetimes, reflecting the fact that, despite some blurring of traditional gender roles, Italy remains a relatively unattractive place to be a mother. Its population is now the second oldest in the European Union, and its pension bill the second highest.

During the good years, German governments paid their way, whereas Italian governments kept growth high by running up debt: in the five years to 1992, mostly good years, the combined deficit of all levels of government averaged 10.7 per cent of GDP. That couldn’t go on indefinitely. By 1992, the net debt of Italian governments had topped 100 per cent of GDP, easily the highest in the Western world. Profligacy had to give way to austerity, and that has hurt.

The Five Star Movement’s moment of glory came when thirty-nine-year-old Virginia Raggi (above) was elected mayor of Rome in 2016. Alessandro Di Meo/ANSA/AP

With the Christian Democrats discredited by massive corruption scandals, the left dropped the Communist Party tag, and entered government in coalition with centrist parties, to try to turn the ship around. On the right, Italy’s biggest media tycoon, Silvio Berlusconi, filled the vacuum by entering politics at the head of his own party, Forza Italia (Go Italy!), and swept into power in 2001. He became Italy’s most durable leader since Mussolini, serving nine years in two terms; parliamentary immunity allowed him to avoid prison for tax fraud, and in power he relaxed austerity, enjoyed himself immensely, amused Italians and the world, but provided no economic leadership.

The statistics make for grim reading. Within Western Europe, only Portugal has fewer workers in IT, no country has fewer university graduates, and not even Portugal invests less in research and development. University enrolments have risen sharply in recent years, but largely because youth unemployment is 35 per cent. Italy has not put in place the building blocks of a cutting-edge, innovative economy.

Italian workers are well-paid; the union movement remains strong, and resistance to change is high. That helps explain why much of the job growth is now part-time — and why so many Italians are unemployed. Unemployment varies hugely across Italy as you move south: in the June quarter, it ranged from 3.3 per cent in the German-speaking south Tyrol and 6.1 per cent in the industrial heartland of Lombardy (Milan), to 10.7 per cent in Lazio (Rome) and 22.1 per cent in Sicily. But the 11.2 per cent national figure is almost twice as high as a decade ago.

Italy and Greece are the last European countries to see a real recovery; even Spain’s GDP per head is back to pre-crisis levels. The IMF estimates that Italy’s GDP per head last year was still 10.8 per cent lower than in 2007. One in four Italians say they can’t afford at least one of the nine key measures — keeping up with the rent and utility bills, having a mobile phone, car and washing machine, effective heating, and so on — seen as defining European living standards. This is the only country in Western Europe where house prices are still falling.

Income rankings can be misleading — on GDP per head, Western countries are often as close as cyclists in a peloton — but since 1990 Italy has been overtaken by Japan, Britain, France, Korea, Taiwan, Belgium, Sweden, Finland, New Zealand, Puerto Rico, Iceland and Malta. That is quite a list. The country that a generation ago was one of the richest in Europe has fallen way behind the peloton it used to ride with, and the IMF projects that in coming years it will be overtaken by Spain, Slovakia, the Czech Republic and even Lithuania.

Part of the problem is the sharp division between Italy’s north (and centre) and the south. It’s a division with deep historical roots. At the start of the fourteenth century, historians tell us, Italy was the richest country in Europe, with a dozen cities bigger than London. But of these forerunners of the modern world, only Palermo was in the south. Historically, you read, migration to the south came from North Africa, while migration to the north was from Germany and central Europe. The gap formed a millennium ago has never been bridged.

Even now, northern Italy, from Bologna to the Alps, is part of Europe’s peloton of high-income countries. The European Union’s statistical agency, Eurostat, estimates that GDP per head in that half of Italy is only slightly below that of Germany and Sweden. But people in the north are almost twice as well-off as those living in the southern third of the country: in Naples, Bari, Sicily, Sardinia, Calabria and Abruzzo.

This is a much sharper division than that between east and west Germany, a gap that was highlighted last month when the far-right Alternative for Germany won the second-highest vote in the east. And Italy’s divide remains entrenched despite decades of government efforts to attract (or force) investment to the south. (Central Italy, by and large, lines up with the north. Living standards in Tuscany and Lazio are close to those in the north, while in the smaller provinces of Umbria and Marche, they’re more like the south.)

As Italy has come under more pressure, the gap has widened. Young people have left the south, where youth unemployment is more than 50 per cent, and headed north to find work. Since 2002, the north and the centre have added 1.8 million jobs; the south has lost 188,000. In the decade to June, the unemployment rate roughly doubled throughout Italy. But in the north, it rose from 3.5 per cent to 6.8 per cent; in the centre, from 5.1 per cent to 10 per cent; and in the south, from 10.9 per cent in 2007 to 19.6 per cent.

The bad economic times are one cause of Italy’s malaise. But another is that Italians no longer have their country to themselves.

Unwanted migrants have found their way into Italy for decades. But in this decade that flow has become a flood, as several million real or economic refugees paid people smugglers to ferry them across the Mediterranean. Italy was on the front line: in the three years to 2016, 506,000 uninvited people arrived by boat. As the route via Turkey and Greece closed off, the seas from North Africa to Sicily became the main route for people smugglers and their clients. In the first six months of this year, 80,000 more arrived, until the Italian, Libyan and Tunisian governments took action to stop the boats.

Many of the new arrivals head ultimately to Germany, but others have settled all across Italy. Italian authorities have rejected more than 60 per cent of the claims for refugee status processed to date, ruling that the applicants were not fleeing persecution or danger, but simply seeking a better life. But sending the rejects back to Africa is more easily said than done. By the end of 2015, Italy already had more than 1.1 million temporary residents from Africa and the Middle East — and that did not include clandestine migrants who have not sought state support.

Many African and Middle Eastern migrants, of course, were invited to come, or accepted as genuine refugees: you meet them all over Italy, working in all kinds of jobs and, from what I saw, doing well. But many arrived without the skills to find work in Italy’s very tight labour market. Some of them turn to crime, form street gangs, beg on the streets, or disfigure Italy’s built heritage with graffiti. And because they’re black, or Arab, they stand out. When police charged a twenty-year-old African last month with raping a young teacher at his migrant centre, it was front-page news and the nation was horrified: you open your door to these people, and look what they do!

The mood in Italy has changed sharply. The island of Lampedusa, between Sicily and Tunisia, which made world headlines in 2013 by welcoming the first boatloads of refugees, is now demanding that the Italian government stop the boats. The youth-based Five Star Movement, which once supported the arrivals, has swung around to an anti-migration stance. So has the right-wing coalition, still dominated by the eighty-one-year-old Berlusconi, even though he himself has been barred from office after finally being convicted of tax fraud.

Even the centre-left government, which once sent out navy patrols to help the boats land, has reversed course. Non-government organisations played a crucial role in ensuring the boats a safe passage; but now the Italian government has required them to sign up to a code of conduct ensuring that they do not encourage more boats, and Libya has banned them from its waters. The effect was dramatic: the number of arrivals in August was just 3914, down from 21,294 in August 2016.

The centre-left’s current leader, Paolo Gentiloni, has won European support, in theory, for a plan to rebuild Libya with billions of dollars of aid money — in return for Libya’s doing its best to stop the boats. Maybe it will happen, maybe not; we’ve seen this movie before. One of the surprising things about Italy’s five million temporary residents is that very few of them come from war-torn countries: most of those from Africa and the Middle East come not from Libya or Syria, but from Morocco, Egypt, Tunisia, Nigeria and Ghana. At first sight, it is hard to see that they can be other than economic migrants.

Even more of them, almost half, come from eastern Europe. Italy hosts almost 1.2 million Romanians, about 5 per cent of that country’s population. It has 450,000 Albanians — 15 per cent of Albania’s population — 235,000 from Ukraine and 135,000 from Moldova. The Romanians speak a language related to Italian and, as EU citizens, they have the right to live there, but these numbers are extraordinarily large, and they don’t include the hundreds of thousands — 178,000 in 2015 alone — who have already taken out Italian citizenship.

Australia is a migrant country, in which mass immigration has mostly worked well. Our policy was gradually liberalised, over decades, creating an extraordinary success story in integration. But Italy until recently was a more or less monocultural society, and many Italians would like it to be that way again. In the long term, the arrival of so many uninvited migrants may work for it, by offsetting what would otherwise have been a steep decline in the population and the workforce. But with three million unemployed, Italy does not need those workers right now. It is another factor in Italy’s malaise.

One more factor is the bizarre nature of Italian politics — a game now played by three sides, or arguably three and a half sides, and under rules that keep changing.

Berlusconi was finally unseated by an internal revolt in 2011. A caretaker government took over and, at the 2013 elections, his coalition of the right was narrowly pipped by a coalition of the left led by what is now called the Democratic Party. But the election was almost stolen by the Five Star Movement — a populist, youth-driven, mostly leftist network created by the ebullient tousle-haired comedian Beppe Grillo. The left won 29.6 per cent of the vote, the right 29.2, and the Grillini 25.6 per cent. Under the rules of the time, the left was awarded a narrow majority of seats; with a slight change in the votes, though, any of them could have ended up running Italy.

Four years later, with an election expected in February, any of them still could. The left is in government, and therefore the right has the wind in its sails. But the economy is improving at last, so the left also has hopes. And while Grillo’s team is going through its own turmoil after the veteran comedian named thirty-one-year-old Luigi de Maio as its candidate to be the next prime minister, it is close enough to snatch victory if the winds shift.

Since 2013, each side has risen and fallen. The Democrats’ first prime minister, Enrico Letta, was overthrown after just ten months by his party’s ambitious secretary, Matteo Renzi. Often described as the Tony Blair of Italian politics — to Australian eyes, he also has something of Paul Keating — Renzi has joined Berlusconi and Grillo as a dominant figure of Italian politics. He quickly set about trying to reach bipartisan agreements with Berlusconi to get reforms through the conservative-controlled Senate, with surprising success. His star rose, and the Democrats won a smashing victory at the 2015 European elections, making him a hero of a European left that was used to losing.

But Renzi oozed arrogance, and didn’t mind offending people — including the voters. His popularity dimmed, and the party’s thin majority disappeared as various leftists broke free, while keeping him in office. Politically, in the end, he died by his own hand: he called a referendum to neuter the power of the Senate, and pledged to resign if it were defeated. And last December, defeated it was. Renzi had no choice but to do as he had promised, and the urbane Paolo Gentiloni, his foreign minister, became the new PM.

The Five Star Movement had its moment of glory at the 2016 local elections when thirty-nine-year-old Virginia Raggi was elected mayor of Rome, and thirty-three-year-old Chiara Appendino, mayor of Turin. But this year it won nothing, while the right won sixteen of the twenty-five biggest cities contested. The polls suggest that if Italy were to vote now, the most likely outcome would be a minority government of the fractious coalition between Berlusconi’s Forza Italia, the formerly separatist Northern League, which now wants greater regional autonomy instead, and the Brothers of Italy, which is something like an Italian DLP, and has its strength in the south.

A poll last month for the newspaper la Repubblica reported that the coalition shared 31.6 per cent of the vote, the Five Star Movement 28.1 per cent and the ruling Democrats just 26.8 per cent. Three separate leftist groupings had 8.2 per cent between them, a centre-right party that supports the centre-left government — remember, this is Italian politics — had 2 per cent, and others 3.3 per cent.

Italy used to have a strict system of proportional representation, but so many minor parties won a share of power that the big parties agreed to modify it by giving whoever comes first a heap of bonus seats to create a workable majority. That’s why the Democrats won a majority in 2013 with just 29.6 per cent of the vote.

But no one else liked that outcome, including the Constitutional Court, which ordered the politicians to try again. And under new rules announced two weeks ago after a deal between left and right, only 64 per cent of the seats in the lower house will be decided by the votes. The rest will be allocated to the biggest parties under a formula too complicated for me to understand. But the gist of it is that a party or coalition will need to poll 35 per cent to win a majority.

The right likes the new system because they are clearly on top, with some polls showing them already close to 35 per cent. The left likes it because, with growth and employment rising, the budget unexpectedly back in balance, and Prime Minister Gentiloni rated Italy’s most popular politician, they think their support will grow — especially if they can negotiate a deal with some of the splinter groups on the left. Beppe Grillo and his movement don’t like it, but then, they rarely like anything the government does.

One wild card in the pack is Renzi. Still only forty-two, his retirement from politics did not last long. By March, he was back in the key post of party secretary, and the same poll that found Gentiloni to be easily Italy’s most popular politician also found that, come the election, most Democrat voters want Renzi to replace him as their candidate for prime minister. And that is clearly what Renzi wants too.

A second wild card is the tussle for leadership of the coalition. Forza Italia has never recovered its former strength, and some polls show the Northern League has more support. Matteo Salvini, who has steered the party on a more moderate course after defeating its founder Umberto Bossi to win the leadership in 2013, says he expects to be the next prime minister, while Berlusconi hopes to lure back the president of the European Parliament, Antonio Tajani, to take the job.

One of the curiosities of Italian politics is that of its three dominant figures, Berlusconi and Grillo are banned from being prime minister because of their brushes with the law, while Renzi is able and willing to be PM but is not even in cabinet. None of them is popular with the electorate as a whole.

Renzi’s recent book Avanti (Forward) suggests that, if elected, he would continue on the path of globally oriented economic reform to try to shake up the Italian economy. The Northern League’s priority is to hand back taxes and powers to the regions, reducing the subsidies the north pays to the south — which is anathema to its coalition partner, the Brothers of Italy. The broader direction of a conservative government, let alone one run by the Five Stars, is anyone’s guess.

Italy is still one of the loveliest and most civilised of countries. It’s the world’s fifth-biggest tourist destination, after France, the United States, China and Spain. For those in full-time jobs, life is still good: stylish, tasty, well-paid and lived out in a sunny climate, against a beautiful background of cities and countryside. But more and more Italians are not living that life, and they want it back. •