February 26, 2013 2:04 am

The case for a grand coalition in Italy

Partnership among the divergent majorities can break the political gridlock

There was a symbolic moment in the Italian elections when I knew that the game was up for Mario Monti, the defeated prime minister. It was when in the middle of the campaign – in the midst of an anti-establishment insurgence – he took off to Davos to be with his friends from international finance and politics. I know his visit to the elite gathering in the Swiss mountains was not an issue in the campaign, but it signalled to me an almost comic lack of political realism.

The return to realism came on Monday. It was brutal, but not entirely unexpected. Pier Luigi Bersani, the centre-left candidate, failed to win the election outright – not even in a coalition with Mr Monti as the pollsters had forecast. The parties of Silvio Berlusconi, Mr Monti’s centre-right predecessor, and the populist Beppe Grillo together ended up with a majority in the Senate, the upper house. Italy’s voting system allows for divergent majorities – which is not in itself unusual. We have the same in the US, and, indirectly, in Germany too. The difference is that Italy is not used to dealing with this outcome.

One of the questions Italian politicians were discussing as results came in is whether to hold new elections. Would this produce a true majority? Would it be seen as fair by the electorate? The answer may well be No to both questions. After the implosion of the centre, Italy has now three large political groups – the centre-left, the centre-right and Mr Grillo’s the Five Star Movement, an anti-establishment movement. It may not be that easy from now on to produce clear cut majorities in both chamber of deputies under the present political system.

The situation is not comparable to that of Greece, where after an initial election last year it was simply not possible to form a government. In Italy, by contrast, there exists a solution to break the political gridlock: a Grand Coalition. And if there is a rerun of these election, the overall outcome may still be the same.

One should consider a similarity with Germany in 2005. Back then Angela Merkel – just like Pier Luigi Bersani, the leader of the Democratic Party – and her Christian Democrats went into the campaign with an unassailable lead in the polls, and faced a formidable opponent who managed to close the gap. Ms Merkel had considered stepping down from the CDU party leadership at the night of the election, but then realised that she could still be the head of a grand coalition. In Italy today it is not entirely clear who would be the senior in this coalition, but there, too, lies an opportunity for a partnership.

I am aware that almost every Italian political expert says this is not possible because of the confrontational style of politics and dozens of other reasons. I respectfully disagree. Italian parties have no experiences of a grand coalition, so much is true. Then again, the German politicians who entered grand coalitions in 1967 or 2005 did not either. Grand coalitions are certainly not a good way to govern countries over long periods because they leave radical fringe parties thriving in opposition. A grand coalition would leave Mr Grillo as the effective leader of the opposition. But grand coalitions can work well for a finite, predefined period, say for one parliamentary term.

Italy is far more likely to deliver any serious piece of legislation on labour market reform, competition in the service sector, or regional reforms within a grand coalition than within a more normal partisan majority.

Imagine if the polls had been right, and Mr Bersani and Mr Monti had formed a coalition with a small majority in the Senate. Would they really have produced any of these reforms? The only way for a large continental European country with a complex political system to agree any such sweeping changes is through broad political coalitions.

Maybe, we need a change of leadership in the parties for this to work. Maybe this is an opportunity for Matteo Renzi, the mayor of Florence, who had challenged Mr Bersani for the leadership of the Democratic Party. But the Italian political parties would be mad if they risked another election, rather than accept the voters’ verdict and get on with the business of running the country.

The next government has a lot of front-loaded business. It needs to reverse Mr Monti’s tax increases, and maybe even consider a targeted stimulus in conjunction with a programme of structural reforms. It is really important to agree such a programme quickly. Stimulus without reforms will lack credibility, and may not bring the desired growth effects. Structural reform without stimulus will fail politically. Mr Monti tried structural reform with austerity, and we all know where this ended up.

The next Italian government has a job, which is hard to do but is easy to describe. It has to end the recession. A grand coalition would be best placed to do that. One should not write it off on the grounds that it never happened before. And if you want to end this panic on the market, then start those coalition talks now.


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