Italian political crisis: likely outcomes

1. The reasons we have had the two successive Conte governments is that at no time since the previous general elections, polls have credibly indicated a parliamentary outcome conducive to a “suitable” successor to Mattarella in  a snap election. The post of President of the Republic is the nexus of the real powers in Italy and has never escaped the grasp of the combine of the  left of center Judiciary – bureaucratic – Union – political complex.2. Mattarella has indicated publicly that he won’t succeed himself (Napolitano , to solve a similar conundrum, bent the rules as it’s customary for left of center politicians ad stayed on provisionally)3. If Elections are called, the present government forces are starting at a rout, losing most of their posts through a combination of the consequences of the cut in parliament seats and loss of votes.

As of now, the president of the lower chamber, Fico, has been assigned the task of squaring the circle and arbitrate the shape of the new possible majority. That doesn’t mean he would receive the post of PM, far from it since his party, like PD, has indicated a preference for a Conte – ter. Indicating the president of the lower chamber was a breach of protocol, since they passed over the president of the senate, Casellati, who anyway is from the opposition, but Mattarella has never been a man to be chained by mere conventions. Fico has convened a table with two representative of each party/parliamentary group to develop a program and form the new government.

Conte is the leading name, for two reasons: there is a moltitude of likely names that are positioning themselves to pitch in, like Cottarelli, Cartabia, Franceschini, Di Maio, etc, but none would be suitable, since Conte could in that case start building his own party with a view to the next elections. These names are possible, but to me it’s either Conte (60% prob), Draghi (25%), elections in june (10%), or some other name, even outside that list. (5%).

Renzi,  the perennial brat, has mooted through the press that Draghi had already been contacted by Mattarella indicating he would bend to the parliament nomination, but Mattarella promptly issued a very public denial of that fact. Has been alternatively indicated as a possible finance minister in an “institutional” government, making it possible to reward him with the Quirinale eventually. But in Italy, where not even the PM has all that power, the finance minister is a nobody. Gualtieri is the present occupant, and he is a marxist history teacher. 

That brings us to the game theory part: Draghi is liked (especially by politicians) because as “the man who saved the Euro”, he is perceived as a walk on water person with great technical prowess and the stature to  impose the needed reforms…. which no politician wants. Even provided Draghi grew a spine and brain, the trick would work only under these conditions:1. a wide parliamentary support, with the biggest “bipartisan” component possible, which means wooing Berlusconi (easy) and at least ONE party between Lega and  Meloni’s FDI.2. That government should be able to cram enough successful policies in time for the next general elections to make sure that its component parties  do not get slaughtered .

Now, Draghi has problems on both those counts. Meloni is a lifelong politician , and she carries zero baggage since she hasn’t been in government high positions, which is the bane of some other suitors like Franceschini, Gentiloni and Renzi. She will be strangely MORE likely to sit a national unity government out than the nominally “Eurexit” Lega, and to collect from….. The meager likelihood of Draghi to enact effective policies.

Punters over here have a relatively small understanding of HOW Draghi saved Italy from Eurexit: In practical terms, it’s as if a school principal facing  an unruly child, on his  half promise of  doing better, had burned his term paper carrying an F mark, and penciled in an A-. So, now that child (Italy), still an F level pupil, should improve aallll the way to an A+. BUT, in terms of voting average, it would record as going from A- to A+, not much. 

Monti, the previous “technical” government, entered service with 10 year rates in the 8% area, and was duly rewarded for its garden variety reforms with a reduction in debt service burden to show the electorate. What could Draghi show after having lopped off heads and enacted reform?

That’s why I think that Conte is a far likelier outcome than Draghi: not his wanting or not wanting the job, everyone agrees he’s the ONLY name that sells, but the fact that he’d be both unable and unwilling to enforce the things Italy needs (Drastic cuts to bureaucratic structures,  a pro-business environment and a stable legal framework with quick and relatively predictable results) and fall back on measures politics want (Drastic rises in estate taxes, possibly with a one-off draconian cut, more state presence in the economy, subsidies etc.)

That moreover leaves out the problem that still haunts the powers that be and that brought forth Conte in the first place: Who will become the NEXT president of the republic. A Draghi prime minister would be ill at east at leaving a sinking ship for the plush ambience of the Quirinale, which would become his hellhole.