International capitalists brace before Italian banking crisis and constitutional referendum

On 9 July, the London Economist came out with a cover entitled "The Italian Job" which portrayed Italy as a bus on the edge of a precipice from which Britain, symbolized by a London cab, is already falling.

[This article was first published in the Italian Marxist paper Rivoluzione]

The pessimism of the spokesmen of international capitalism was based on two elements: the crisis of Italian banks and their fear that the referendum on constitutional reforms [aimed at conferring the sitting government a stronger hold on power] could end up like the one on Brexit.

Both of these fears are more than justified. The Italian crisis is mature and can explode at any time.

The Italian banking crisis does not arise primarily from the madness of speculative finance and real estate bubbles as happened in other countries. The hard core of those 200 to 300 billion of loans (bad, substandard, overdue debt) is linked to the crisis of thousands of small and medium-sized enterprises, as well as the collapse of family budgets. It is therefore closely connected to the state of the real economy and that is why it is so difficult to resolve.

The various rescue and support plans to banks are nothing more than attempts to hold the problem back or postpone it, but do not provide real solutions. Monte dei Paschi (MPS) [recently in the spotlight for being at the centre of a major banking crisis] is "worth" today 700 million euro and it is seeking a 5 billion recapitalization: money that simply is not there and that eventually will be coming out of public funds (from the Cassa Depositi e Prestiti owned by the Finance ministry, or from pension funds). A “bridging” loan by JP Morgan could be tried in the hope that at least some of the bank’s creditors agree to convert their problematic credits into shares of the bank itself.

The problem is that Renzi cannot use public money to bail out MPS, because of European Union rules. He is playing hide and seek with Merkel and the European Central Bank, counting on the fact that no one in Europe will want to be too fussy about this in these troubled times. But the procrastinating tactic has only three possible outcomes: bankruptcy, rescue with public money or foreign capital taking over at a discount. Caught between a rock and a hard place are the workers of the banking sector, of which Renzi aims to halve the number.

But it is not just about MPS: Unicredit, the biggest Italian bank, has just barely scraped through the Frankfurt stress tests, with subsequent collapse in the stock market at the beginning of August, and it is also looking for a new injection of capital.

The real economy is locked into a persistent crisis. The Jobs Act [the new labour laws introduced by Renzi], which represented a frontal aggression against workers’ rights, revealed to be a total failure. Instead of increasing the employment rate, it increased the share of the population that went out of the labour market. The Italian Institute of Statistics (ISTAT) reports zero growth in the second quarter of 2016. The bosses, like they do every year, gathered for their convention in Cernobbio and welcomed a procession of ministers who promised tax cuts and breaks for businesses, as well as a possible new attack on the national bargaining contract. The bosses’ association, Confindustria, cashed in and encouraged them through their president Boccia: "We know that the room for manoeuvre is limited, but every little helps."

There is also a concrete risk that the planned deficit for 2016 will be higher than expected, which would push the government once again in the direction of touching the pension system. There is talk of a Stability Budget Law worth 25 billion euros of cuts for 2017 and, needless to say, it is quite clear who will have to pay the bill.

With the economy stagnating, the only thing that seems to be growing is the production of stunts by Renzi and his ministers. The referendum, that was to ratify the prime minister’s personal triumph, magically disappears from all screens. The famous "if I lose I resign!" has become a modest "read it carefully and you will see that it is a good reform…" Panic was such that the referendum date official announcement is being held back [the referendum date was eventually announced for 4 December].

They are afraid, and rightly so! By now it should be clear, even to a blind man, that all over Europe all governments – whichever political colour they may be – are in a minority among the population. As soon as the people are consulted on anything that matters, whatever the subject under discussion, in the first place mistrust and disgust emerge for those who are in power.

Even Angela Merkel learned the lesson at her own expense with the defeat in the elections in her native region of Mecklenburg. This will not be the last.

The political crisis is therefore more than ripe. It is starting to rot. Exactly as Merkel, Cameron, Hollande, etc. Renzi is also due to collide in the short term with a simple fact: his government has no real popular support. His policies are popular only among the privileged minority in a country where according to recent studies, since the beginning of the crisis, 97 per cent of the population had falling or stagnant income.

The referendum can be an opportunity to coalesce around the NO to the reform all the popular discontent that has accumulated over the years without finding a real outlet. But beyond the vote, and much more important than the vote itself, the fundamental issue is the need for an alternative. In this struggle the workers and youth must take a stand, not only by casting a NO in the referendum ballot, or, as it has happened on more than one occasion, by choosing to vote for opposition forces, like the Five Stars Movement, in order to give a blow to the government.

It is necessary alongside with the NO campaign to build a platform and a real mobilization in defence of the interests of the workers, the unemployed and the youth and demand in the first place that the leaders of the CGIL [the main trade union confederation, which eventually took a position in support of the NO, but decided not to get involved in the campaign] wake up and take position in this clash, with a real platform of struggle for employment, wages, education and public health in order to kick out this government.

5 September 2016