Italy's in terminal decline, and no one has the guts to stop it >> The Spectator

Fri, 31 Oct 2014 17:09

Rome

The Rome Opera House sacked its entire orchestra and chorus the other day. Financed and managed by the state, and therefore crippled by debt, the opera house '-- like so much else in Italy '-- had been a jobs-for-life trade union fiefdom. Its honorary director, Riccardo Muti, became so fed up after dealing with six years of work-to-rule surrealism that he resigned. It's hard to blame him. The musicians at the opera house '-- the 'professori' '-- work a 28-hour week (nearly half taken up with 'study') and get paid 16 months' salary a year, plus absurd perks such as double pay for performing in the open air because it is humid and therefore a health risk. Even so, in the summer, Muti was compelled to conduct a performance of La Boh¨me with only a pianist because the rest of the orchestra had gone on strike.

After Muti's resignation, the opera house board did something unprece-dented: they sacked about 200 members of the orchestra and chorus, in a country where no one with a long-term contract can be fired. It was a revolutionary '-- dare one say Thatcherite? '-- act. If only somebody would have the guts to do something similar across the whole of the Italian state sector. But nobody will. Italy seems doomed.

The latest panic on global stock markets has reminded the world of the vulnerability of the euro, and this week pundits in the British press have been busy speculating about France's possible collapse. Hardly anyone bothers to fret about Italy any more, even though last week its exchanges took the second biggest hit after Greece. Italy's irreversible demise is a foregone conclusion. The country is just too much of a basket case even to think about.

Italy's experience of the European monetary union has been particularly painful. The Italians sleepwalked into joining the euro with scarcely any serious debate, and were so keen to sign up that they accepted a throttlingly high exchange rate with the lira. The price of life's essentials, such as cigarettes, coffee and wine, doubled overnight while wages remained static '-- though back then jobs were still easy to find and money easy to borrow. But when the great crash happened, Italy, as a prisoner of a monetary union without a political union, was unable to do anything much about it, and could not even resort to the traditional medicine of currency devaluation.

The only path to recovery permitted by Brussels and Berlin '-- that of austerity '-- has been counterproductive because it has only been skin-deep. If austerity is to stimulate growth, it must be done to the hilt, which inevitably involves terrible suffering and the risk of mass agitation. No Italian politician can stomach that.

Italy can't blame all its problems on monetary union, however. The euro did not cause the catastrophe, but it deprived Italy of a means to combat it and exposed its fatal structural weaknesses.

The youth unemployment rate here is 43 per cent '-- the highest on record. That figure doesn't factor in the black market, which is so big that the Italian government now wants to include certain parts of it '-- prostitution, drug dealing and assorted smuggling '-- into its official GDP figures. The contribution is thought to be sizeable enough to take the country out of its third recession in six years.

We should remember that Italian companies get state money to pay workers to do nothing and not sack them '-- currently about half a million workers are in what is known as 'cassa integrazione'. So the real unemployment rate in Italy must be at least 15 per cent, and that does not include all those who have given up trying to find work. Just 58 per cent of working-age Italians are employed, compared with an average 65 per cent in the developed world.

Even including all the cocaine and bunga-bunga does not alter the extra-ordinary fact that Italy's economy has been stagnant since 2000. Indeed, over the past five years it has shrunk by 9.1 per cent. Worse still, it went into deflation last month, the thing that everyone most fears '-- even more than hyperinflation '-- and which caused the Japanese economy to stagnate for 20 years.

Since the defenestration of Silvio Berlusconi in November 2011 as a result of the bunga-bunga scandal, and the horrific gap that opened up in the value of Italian and German bonds, Italy has had three unelected prime ministers.

The left-wing Matteo Renzi, the latest of these, is billed as Italy's Tony Blair because he has managed to force his party, the post-communist Partito Democratico, to forget the past and face the future. Initially, he promised that he would bring in all the necessary structural reforms within 100 days; but of course he did not, and now he says that he needs 1,000 days.

Il rottamatore (the 'demolition man'), as Renzi is known, has just forced through a reform bill amid much fanfare and even physical fighting in the Senate. Renzi's bill is supposed to abolish the mythical Articolo 18, which makes it virtually impossible to sack anyone in companies that employ more than 15 people. Yet if the bill ever becomes law, this being Italy, it will no doubt be so watered down by the time it reaches the statute books as to be meaningless. The unions have promised 'un autunno caldo' (a hot autumn) to protect their most prized sacred cow.

Same old story. Regardless of who is in charge in Italy, it is nearly always all mouth and no trousers, which to be fair is partly because the electoral system makes it impossible to avoid coalition governments and partly because the constitution, for fear of dictatorship, gives the prime minister little executive power.

Italian TV broadcasts wall-to-wall political talkshows (most of them left-wing even on Berlusconi's channels) but they too are in crisis: the Italians, fatally disillusioned, are not bothering to watch television any more.

Italy's sovereign debt, meanwhile, continues to grow exponentially. It is now '¬2.2 trillion, which is the equivalent of 135 per cent of GDP '-- the third highest in the world after Japan and Greece. And the more deflation Italy has, the bigger the debt and its cost in real terms.

In Italy, as in France, a dirigiste philosophy has predominated since the second world war. The government is run like a protection racket; money finds its way into every nook and cranny of the economy. Even newspapers are publicly subsidised, which is why there are so many of them.

Anyone who works in the real private sector '-- the family businesses that have made Italy's name around the world '-- is in a bad place. Italy has the heaviest 'total tax' burden on businesses in the world at 68 per cent, according to the Sole 24 Ore newspaper, followed by France on 66 per cent, compared with just 36 per cent in Britain. To start a business in Italy is to enter a Kafkaesque bureaucratic nightmare, and to keep it going is even worse. It also means handing the state at least 50 cents for every euro paid to staff. Add to this a judicial system that is byzantine, politicised and in possession of terrifying powers, and you begin to understand why no sane foreign company sets up headquarters in Italy.

I worked for a regional newspaper, La Voce di Romagna,as a columnist for a decade until a year ago, but gave up after my employer '-- even though in receipt of hefty public money '-- failed to pay me for three months. I was not entitled to dole money, because I was self-employed. Employees with proper contracts are entitled to the dole, but only for a year or so. Many of my colleagues have not been paid for up to a year. Now, though, La Voce is about to go into bankruptcy and close. I would not bet a single euro on those former colleagues getting any of the money owed to them.

Yet there is another Italy '-- the state-financed one '-- where life is, if not a bed of roses, still fine, all things considered '-- even though those Rome Opera House sackings have caused a little ripple of anxiety. Italian MPs are the highest paid in the civilised world, earning almost twice the salary of a British MP. Barbers in the Italian Parliament get up to '¬136,120 a year gross. All state employees get a fabulous near-final''salary pension. It is not difficult to appreciate the fury of the average Italian private sector worker, whose gross annual pay is '¬18,000.

The phrase 'you could not make it up' fits the gold-plated world of the Italian state employee to a tee '-- especially in the Mezzo-giorno, Italy's hopeless south. Sicily, for instance, employs 28,000 forestry police '-- more than Canada '-- and has 950 ambulance drivers who have no ambulances to drive.

An Italian government that really meant business would make urgent and drastic cuts not just to the bloated, parasitical and corrupt state sector, but also to taxes, labour costs and red tape. Yet even now only Beppe Grillo, a modern comic version of Benito Mussolini, and the separatist Northern League advocate Italian withdrawal from the euro. Most Italians still don't get it: the euro is the problem, not the solution '-- unless, that is, they go for real austerity in a major way, which they will not do unless forced to at gunpoint.

Italy, more even than France, is the sick man of Europe '-- and it is also the dying man of Europe. Italian women used to have more children than anyone else in Europe. It is common to meet old men called Decimo ('Tenth'). Yet for decades the birth rate in Italy has been among the lowest in the world, and if it were not for immigration the population would be in decline. When Italian women refuse to make babies, it is a clear sign of a terminally sick society.

This article first appeared in the print edition of The Spectator magazine, dated 25 October 2014