Rumor and Recriminations in Rome

Governments and financial markets are supposed to be run by hardheaded men and a few women who deal with facts, like Dickens’s Mr. Gradgrind — public servants who evaluate the data and don’t let emotions get in the way of their pursuit of power and profit. In truth, however, the markets yo-yo at every half-truth, so successful politicians must control the image before concerning themselves with reality. The character of Rumour, in Shakespeare’s Henry IV, is perhaps the more fitting character for contemporary politicians to keep in mind:

I, from the orient to the drooping west,

Making the wind my post-horse, still unfold

The acts commenced on this ball of earth.

Upon my tongues continual slanders ride,

The which in every language I pronounce,

Stuffing the ears of men with false reports.

Shakespeare’s references to reports in many languages flying from east to west on the wind ring especially true in a Europe of perpetual financial doom.

Italy’s current crisis is nowhere near as dramatic as Henry IV’s nor as bloody, but like the Wars of the Roses, it has some striking actors. Like Rumour, Italy’s crisis is fueled by reports in Greek, Portuguese, Spanish, and English. Italy’s Gradgrind "facts" are bad, but hardly worse today than they were a year or two or three ago. Italy’s ability to repay its debts is no less either. But if everyone (read: the markets) thinks that it is weaker, then it is. And if the government is unable to lead, then the crisis becomes real. Here the rivalry between prime minister and the finance minister is crucial, a rivalry that is personal and policy-driven.

Center stage at the moment and enjoying every minute is Giulio Tremonti, minister of the economy and finance, and, this week at least, savior of the Italian economy and possibly the euro, too. There has been almost a year of grumbling in the center-right coalition: Tremonti has been calling for spending cuts, while Prime Minister Silvio Berlusconi and the rest of the government want to spend their way back into better approval ratings.

On Thursday, July 14, Tremonti presented his budget to the Senate. The prime minister’s seat next to his was conspicuously empty. Tremonti was happy in the limelight: His speech was full of trademark sarcasm and I’m-cleverer-than-you remarks, ending with the warning that "If we don’t act now, then we will be like the Titanic, and even the first-class passengers suffered." Curiously he pronounced the word "Titanich" as if it were a Yugoslav partisan. Maybe he needs that kind of ruthlessness. In any case, the simile was apt: On that ill-fated sinking ship, many more first-class passengers survived than second-class or steerage. Likewise, his budget hits the middle and poorer classes hard. Corriere della Sera, hardly a die-hard anti-Berlusconi rag, reckoned that families would be paying €1,000 more in the coming year.

Health service charges have gone up; tax deductions are down. Government payments to cities and regions (the equivalent of U.S. states) are cut, which means that their social services will be reduced or local taxes will be increased. Taxes on fuel prices went up 6 cents a liter last week: Gasoline is now €1.60 per liter, diesel €1.50.

But there was no obstruction from the opposition; the bill passed without debate in both houses with each party simply declaring how it would vote and why. The opposition found itself in a corner. If it had tried to stop the measure, then the speculators would have continued, the spread between Italian and German government bonds would have continued to widen, and the crisis would have moved into catastrophe mode. And the opposition would have been blamed. Instead, it accepted President Giorgio Napolitano’s counsel and allowed the budget through in two days.

Tremonti recognized their support in what was a genuine expression of gratitude. He concluded, though, in his more normal supercilious vein with a clear stab at Berlusconi. He quoted Livy: "Hic manebimus optime," literally translated as "We will stay here very nicely." Which meant, of course: "Don’t think you can fire me, because I have the support of President Napolitano and if you try, then the rating agencies, the European Central Bank, the European Union, and above all the speculators will shaft Italy." It was another salvo in the long-running war between Berlusconi and Tremonti.

A month ago, Tremonti put forward his plans for a serious austerity budget only to have Berlusconi tell the world that "Tremonti does not run the show. Cabinet decisions are taken collectively." The proposal that appeared last week was a pale copy of the original; €47 billion in savings, but only €2 billion this year and €5 billion the next. Twenty-billion euros will wait for 2013 (after the elections) and another €20 billion for 2014. It also included a clause that would have delayed payments of damages in civil cases; it just so happens that a verdict was expected in a case in which the defendant was Berlusconi’s Fininvest. This was a blatantly pro-Berlusconi measure; Tremonti denied any hand in it. In any case, Napolitano made his disapproval very clear, and the clause was removed. But Berlusconi took it as an opportunity to vent his personal animus toward his finance minister, declaring an interview that Tremonti was not "a team player."

Tremonti is not the only one under attack from his boss. One of his close advisors in the Finance Ministry, Marco Milanese, is under investigation for corruption. He is alleged to have taken payments in return for positions and contracts from the ministry as well as having a highly extravagant lifestyle. He apparently turned down the offer of an Aston Martin because it was "secondhand" and took a Ferrari instead. Worst of all for Tremonti, Milanese paid €8,500 a month for an apartment that Tremonti occupied for the last year, echoing another Berlusconi minister who was forced to resign when it was discovered that his house was paid for by someone else "without the minister’s knowledge."

Milanese is also alleged to have been carrying out Tremonti’s duties without any official delegation of authority and to have been rather too close to the minister. The mudslinging has only just begun.

On the prime minister’s side, there is plenty of mud that has already been slung and plenty more waiting in his various trials. But apart from the personal scandals, he is politically weaker than ever. Local elections and referenda in May dealt him serious blows: His approval ratings are below 25 percent. Last week he made no public appearances, avoided the Senate debate, and arrived late for the Chamber of Deputies vote, which he attended without speaking.

The hero of the hour is Napolitano. The Italian president is a largely symbolic figure, not unlike Queen Elizabeth, but he has residual authority that he uses when the normal executive is lacking. It was his mediation that took the budget through Parliament. Berlusconi felt left out (and he was).

Paradoxically, the weakness of both Berlusconi and Tremonti means that neither can trump the other, at least in the short term. If they tried, then the sharks from the financial markets would rush in and the results would be disastrous — not just for Italy but the whole of Europe. For the moment, they are the odd couple who just have to put up with each other.

Remarkably, the budget that passed had no immediate measure to cut the costs of politics. Italian parliamentarians are the highest paid in Europe, with very generous pensions after their retirements. This Monday, July 18, Italians will be paying more for their health service, and pension increases will be stopped for many; yet parliamentarians were spared any significant cuts.

Italians’ unhappiness about such greed from their politicians is growing; it hasn’t reached the point where violence of the sort we’ve seen in Greece is likely, but as the cuts sink in, there is bound to be some reaction.

It’s a drama of big players in Italy. It makes for good theater, but the country’s discontent is very real and needs no Rumour to propagate it.