Chapter 16: The end of the first republic


Chapter 16: The end of the first republic

16.1 Andreotti and De Michelis spearhead the establishment of the euro

With the crisis of 1989 and the fall of communism in the Eastern bloc, the PCI changed its name for the first time to distance itself from that legacy. Subsequently, the party went on changing names several times, eventually dropping any reference to the old communist party and calling itself now the Democratic Party (PD). That time, the fall of communism in eastern Europe was the toughest for the Italian communists. They had not been too close to Russia but enough to be dragged into infamy, pooled together with the other falling parties all over the world. They were wary they would soon follow the same destiny of their brethren, and in fact for a few years the old DC and the socialists concentrated an enormous amount of power without opposition and without the need to throw even a few bones to the PCI.

Andreotti and Foreign Minister Gianni De Michelis were the main international players of that time. With the fall of communism in East Germany, then West Germany chancellor Helmut Kohl pressed for the reunification. The French—led by president Francois Mitterand, the political head of Europe at the time—were among the first to agree to it, and the Americans saw in it an opportunity to advance the NATO borders while others in Europe were more reluctant, still aware of the troubles a united Germany created in World War I and II. In fact, many were way of the power and influence of one Germany in Europe. Andreotti famously said, “I like Germany so much that I prefer to have two of them.”

Eventually, however, Germany obtained its reunification in October 1990. In return, Kohl agreed to give up the Deutschmark and support the plan for a united European currency. This was just one of the many events of those months.

In August 1990, the Gulf War had started, which George Bush senior concluded on February 28, 1991 with dramatic consequences for the future balance of power in the Islamic world. Between August and December 1991, the USSR broke up, and Gorbachev, to the chagrin of many of his friends in the West, was no more. But the US, after the attempted military coup in August, preferred not to take chances and whittled down the formerly sprawling union, putting it under the watch of US-supported Boris Yeltsin.

The US looked almighty in its honeymoon with its former archenemy, Moscow, and nothing seemed to stand in its way. In fact, the US support was so strong, and there were no international or internal threats to the DC power, so Andreotti and the socialists decided it was time to stop turning a blind eye to the Mafia and went to back Palermo persecutors Falcone and Borsellino in their fight.

In this situation, the Europeans had plans of their own. Mindful of the risk that the objective pressures of a larger Germany might have in Europe, the French and Italians were keen on pressing Kohl on his pledge to formally give up the mark as a first step toward a united Europe. The Americans, who had just defeated the Soviets, did not want to see the rise of some kind of united Europe headed by the French, the most riotous of their Western allies. Paris for many years had remained proudly not fully integrated in NATO.

It also quite possible that Mitterrand wanted to move quickly in the direction of a politically united Europe because tensions in Yugoslavia, which had started in late 1990 and were reflected in contradictory pulls in Europe. France and UK initially supported Serbia, in its early attempts to salvage a union; Germany backed Slovenia and Croatia in their pulls for independence.

Pre–World War I history seemed to return like a bad dream: Germany was supporting Slovenia and Croatia in their goals for independence, and France and the UK were supporting Serbia in its efforts to keep the union and dominate it. With Russia too concentrated on its own woes, the differences over the future of Yugoslavia were creating very dangerous tension that could spin out of control, almost like World War I, which had begun just over the issue of the southern Slavs.

On June 25, 1991, Slovenia and Croatia declared independence, war soon started in Croatia, and on January 15, 1992 the world recognized the independence of the two new states and the breakup of Yugoslavia. Eventually, to avoid taking sides, the European countries pleaded with the Americans to intervene to bring peace in the Balkans.

In the meantime, just days after the international recognition of independence for Slovenia and Croatia (backed by Germany), on February 7, 1992 the European countries, driven by France, Germany, and Italy, signed the momentous Maastricht agreement on the unification of their currency. The future euro would unite the largest economic constituency in the world, which in turn would de facto limit the centrality of the dollar, basis of the economic order established with the Bretton Woods agreement in 1944, at about the end of World War II. This was happening right after Soviet empire, the main adversary of that economic order, and a political enemy for half a century, had been vanquished. Then the united currency could be perceived like a finger poked in the eye of the Americans.[1]

The agreement was signed on the Italian watch, who held the rotating presidency of the union, and Andreotti and De Michelis, backed by Mitterand and Kohl, managed to duck the Americans and the British, then ruled by Margaret Thatcher, who could have stopped it. With that agreement signed an inevitable countdown was set in motion. The goal was to create a united currency from the looser agreement on the ERM (European Exchange Rate mechanism), whereby every European currency was pegged with each other within certain fluctuation bands.

In autumn 1992 the European monetary system came under attack. Financial speculators, mostly from Wall Street, exploited the fact that European currencies had semi-fixed exchange rates but very different interest rates. They bet cheaply on the German mark against the British pound or the Italian lira. Many European countries almost went bust as a result, and all European central banks lost tons of money. In a way, the euro was born in 1992 under a failing ERM star. This is because at the time of the financial crisis, the agreement for the establishment of a united currency, the euro, was also signed in Maastricht. The new currency sought to overcome the problems of the ERM by creating one single hard currency (against a system of currencies linked with fluctuating exchange rates).

Yet to participate in the currency, member states had to meet strict criteria, such as a budget deficit of less than 3% of their GDP and a debt ratio of less than 60% of GDP (both of which were ultimately widely flouted after introduction), low inflation, and interest rates close to the EU average. Italy didn’t meet many of the requirements, but it had about a decade to come around. After all, it then looked like a possible bet.

The Italian political situation was very solid, the DC and the socialists were in full control, and no danger was on the horizon. Italy had taken a decade to double its GDP to debt ratio in the 1980s to buy off the restive communist masses with an extensive welfare program. Later, a decade after, when communists had disappeared and terrorism was no longer a threat, it could roll the program back in in time to join the united European currency, which then still didn’t have a name.

These plans were shattered by a massive anti-corruption campaign that took the old political class totally by surprise. Over the next decade[2] Italy improved its ratio of debt-GDP but not enough to meet the standards set by the European Union and later, after joining the euro, it just abandoned the effort.

16.2 The 1992 “clean hands” movement; judges and newspapers against the old regime

Magistrates were the heroes of Italy in the early 1990s. They had fought and defeated black and red terrorism; they were fighting the monstrous mafia. Many magistrates were killed by terrorists and Mafiosi. Moreover, they were conducting this fight while preserving freedom and democracy—they didn’t let Italy slide into an authoritarian society. They were the great wall of law and freedom in Italy, and many of them were supportive of communist or left-wing ideas, or felt politically very committed to the well being of the country.

In this situation on February 17, 1992 Milan prosecutor Antonio Di Pietro arrested Mario Chiesa, a member of the Italian Socialist Party, for accepting a bribe. The socialists distanced themselves from Chiesa. But he was pressured by the judges, who placed him in the new witness protection program with the promise of a milder sentence in return for collaboration. The program had been recently introduced as an instrument against the Mafiosi. Chiesa thus informed about corruption, implicating his colleagues. It was the start of the Mani Pulite (“clean hands”) investigation. News of a crackdown on political corruption began spreading in the press that was soon wildly supportive of the magistrates’ action.

Yet the scandal did little to dent the socialists’ success in the following general election on April 5, 1992. The ex-communists were thrashed, partly because a hardcore communist splinter ran on its own. Under the new name PDS (Democratic Party of the Left) they got only 16.1%, down 6.6%. The DC fared only a little better bleeding 4.6% and going down to 29.7%. The socialists lost a mere 0.7% and were now for the first time since 1948 very close to the communists with 13.6%. The big event was the huge unexpected success of the anti-system Northern League, which came from nowhere to score an impressive 8.65%. The fall of communism in eastern Europe had hurt the communists in Italy, but the anti-Mafia campaign exposing Sicilian complicity with the local DC, had hit the Christian Democrats more and aroused the anti-southern sentiments channeled by the Northern League. According to the sentiments of the League the unitary Italian government in Rome, the widespread corruption, the Mafia, and the ruling parties DC and PSI were all birds of the same feather.

In the DC some thought of supporting the Milan magistrates’ investigation in hope that this could undermine the socialists and swing popular favor for the new cleaner DC. Part of this strategy was also to elect as new president, a DC old times, with an experience as magistrate and a history of honesty, Oscar Luigi Scalfaro. He became president on May 25 1992 when Clean Hands was already in full swing, and the parliament had a hard time finding a stable majority. Then it was a moment of panic, with every party looking for its own safety and Northern League and the extreme left riding the new protest vote.

The agenda of the future government to reform state expenditures, set just three months before in Maastricht, was already out the window as political momentum was dictated by the magistrates’ investigation. Its progress was leaked to the public, and thus backed, by the press, reinforcing popular sentiment against the old political set-up and in favor of the anti corruption drive.

During April 1992, many businessmen, industrialists, and politicians, especially from the majority parties but also from the opposition, were detained on charges of corruption. They were humiliated in public before TV cameras and held in prison for months, although in the past those facing similar accusations could soon make bail. Under this duress, for which they were not prepared, industrialists and politicians confessed, implicating a larger number of people. There was panic spreading through the rank and file. In the beginning the big party leaders felt that by giving up some minor culprits, the campaign could be soon reined in. In fact, the opposite happened. Minor politicians felt they had been left in the cold, no longer trusted their bosses or a political system that was apparently falling apart, and tried to save themselves in the only way they saw: confessing to their crimes and implicating the big names. Things proceeded very rapidly, like in a revolution.

By June 1992, when Scalfaro was president and in theory had ways to slow down the magistrates’ investigations, the anti-corruption campaign was moving at full speed. So if the president had tried the campaign he might have been steamrolled by the concerted effort of the domestic and international press and the judges. Politicians like socialist treasurer Sergio Moroni killed himself in September 1992; in July of the next year, it was the turn of industrialist Raul Gardini (one of Italy’s top ten managers) and ENI CEO Gabriele Cagliari to commit suicide in prison.

The political situation was extremely volatile, and in December 1992 in some local elections the DC was severely beaten. Soon socialist party leader Bettino Craxi, possibly the second most powerful man in Italy after Andreotti, was officially indicted for corruption.

On March 5, 1993, the Italian government of premier Giuliano Amato tried to find a solution with a law that replaced criminal charges for several bribery-related crimes with a form of administrative impeachment. This would have de facto ended most if not all ongoing investigations. Judges, supported by the press and public opinion, turned against what they saw as de facto amnesty for the corrupt politicians. As revolution had flared in Eastern Europe, it was burning now Italy, the country for decades hinged between east and west.

The “amnesty” could have led to larger protests and greater support for the extreme left and the Northern League. Scalfaro refused to sign the decree, deeming it unconstitutional. The following week, a US$250 million scandal involving ENI, the government-controlled national energy company, was revealed. The stream of accusations, jailing, and confessions became almost all-encompassing.

On April 18 1993, the public overwhelmingly backed the abrogation of the existing proportional representation electoral law for parliament in a referendum, and a mixed electoral system (proportional and majority) was introduced that August. Proportional representation was blamed for not guaranteeing stable majorities and allowing corrupt actors to move into politics by buying votes and favors.

What had happened was that the old political equilibrium that held in Italy for half a century had fallen apart. The old political system, set in 1948, gave large representative powers to parliament to prevent authoritarian slides into fascism or communism. The widespread representation was balanced by de facto vetoing neo-fascists and communists access to central government. This congealed for half a century some 35% of the vote and had created a stable enough majority centered on the DC.

After the fall of communism in Eastern Europe, the Italian communists who had collaborated in the anti-terrorism fight and the push for reforms in the Soviet empire, thus proving their democratic mettle, were weakened, and the PDS gained power. This, plus the ongoing anti-corruption campaign that was eroding the old ruling parties, and the rise of the Northern League had expanded the realm of political possibilities. A new electoral law was needed. Amato resigned, as the parliament was unable to find a new majority after April 1993. Carlo Azeglio Ciampi, former governor of the central bank, was chosen to head a technical government out of party influences. The parliament tried still to stop the investigation, but the public uproar and a new massive trial involving the state oil company ENI, brought everything down like a house of cards.

By the end of 1993, traditional parties were being dissolved. Craxi, the last bastion of resistance, admitted to taking a bribe and the old power and clout of the socialists seemed about to vanish. The old world was falling apart, and the former communists of the new PDS and the Northern League looked like the major beneficiaries of this upheaval. For both of them, at the end of 1993, the next target was Craxi’s old friend and ally, Silvio Berlusconi, who had been supporting the socialists with his TV networks. Things turned out, again, very differently from what was forecast.

16.3 The Northern League and Berlusconi join the big game

The Northern League came to life first in the mid-1980s fueled by vague and racist resentment between the south and the north. A century after the unification of Italy by Garibaldi, some northerners reopened the issue of the Italian unification on totally new grounds. Some 130 years of unity, decades of extensive support for the development of the south had not closed the wealth gap between the two sides of Italy, and much of the Northern tax-payers’ money was squandered in corruption in the South. Then the Northern League came to say openly what many in the north had thought secretly for some time: we want to break off with the south. This was seen as a main path to recovery and decrease fiscal pressure on the vibrant northern industry. The growing tax pressure was the fuse. To finance the burgeoning state deficit, the government had been raising taxes and people in the north felt it was not right to pay so much money for people in the south who would squander it—or worse pocket it away.

The issue of Italian unity had lost all its romantic and ideological thrust and was viewed on the practical basis of efficiency of expense. The problems were roughly the same as those in Yugoslavia: northern regions were contributing more to national wealth, which had been wasted in the south and in Rome, that North League called ladrona, the big thief. The north thought it would be better off without the south. The Northern League, was in fact established in the 1980s and for a decade it survived on the fringes of the political scene. The exposure of the corruption, the money wasted, plus the new fiscal pressure to meet the new European requirements on deficit, brought it to the surface.

In new local elections on June 6, 1993, DC lost half of its votes once again; the socialist party virtually disappeared. Instead the Northern League became the single strongest political force in northern Italy, although it was still a long way from obtaining an absolute majority in the country. The left-wing opposition was approaching majority, but still lacked unity and leadership. As Italy was falling apart and engulfed in the wave of scandals, many northerners, supporting or not the North League, thought of pulling out. Was Italian unity simply a mistake? Was Italy bound to go back to division and disintegration? At the time, no somber political commentator really took these options seriously. Italy was too integrated, with too many southerners living in the north, to tear it apart. But these issues were hotly debated.

The left, coalescing around the ex-communists now calling themselves PDS, was without any opposition and believed it would actually come to power and thus thrash the last remnants of the old system. The PDS promised it would break down Berlusconi’s media empire and send him and his family to destitution. The PDS also appeared to be a sensible answer to some racist ravings from the Northern League.

In this situation, the former voters of DC and other parties that had dominated Italian politics for five decades felt lost and with nobody to turn to. Silvio Berlusconi realized a new “market need” and moved to cater to it. Plus, without the old socialist political protection, Berlusconi had his back against a wall because of financial difficulties: if he did nothing he would end up like other businessmen caught in the dragnet of “clean hands.” In February 1994, his brother Paolo admitted to corruption charges, and many thought soon elder Silvio would be taken in—but that didn’t happen.

In 1994, Berlusconi entered politics by storm. He named his party Forza Italia, a soccer cry with an immediate appeal to people who were losing faith in their country. Rapidly he clenched deals with the two “untouchables” of Italian politics, the neo-fascists of the old MSI (Movimento Social Italian, Italian Social Movement) and the Northern League. Both formations were deemed too rightist or too racist to be allowed talks with the PDS. The former communists thought they didn’t need to talk to anybody anyway because they had already bagged the electoral victory.

The national press that in earlier times had been for the government was then for the PDS and so was the international press, calling the PDS “ex-communist” (that is, no longer communist, and thus entitled to rule) and the MSI “neo-fascist” (that is, still fascist, and thus not permitted to join the government). The PDS was so confident of its strength that it didn’t fully use the argument that was creeping up then. The argument was about the conflict of interests for Berlusconi, owner of a large media empire and leader of political party. The left thought that after his defeat in the elections, the investigations of the magistrates would take care of Berlusconi.

Things turned out very different as Berlusconi actually won the elections. The PDS sank into chaos, and Berlusconi immediately moved to try to pass a law that would hamper further investigations.

But the law and the electoral victory didn’t solve the situation. Italy soon became extremely divided along new ideological lines. With Berlusconi there was a motley group of people. There were those who were scared of the communists, no matter if now they had a different name and were blessed by the US. These were those who had become extremely rich in the previous decade of rampant corruption and squandering of state funds and now were scared that they would have to return their ill-gotten fortunes. Then there were people genuinely conservative, who saw Berlusconi as the continuity.

Against them there was another varied group. There were the new law-and-order people who wanted to do away with the pervasive corruption of the system. There were the heirs of the left-wing revolutionaries, who thought this was at long last their time to gain power; and there were sincere democrats who thought Italy should radically move away from its lingering feudal past.

In this controversy in the 1990s, the magistrates were the ultimate arbiters. They had rescued Italy from terrorism and the Mafia, and launched the then on-going anti-corruption campaign that had finally managed to disrupt the DC hold on power that had lasted decades and had been smothering the country. Coming from them, the accusation against Berlusconi of subverting the rules by using elections to break the law had a strong ring of truth.

This accusation was extremely powerful to the Northern League, which had been one of the most adamant advocates of the magistrates. How could then the Northern League turn against the judges and side with the corrupt group assembled around Berlusconi? Plus, president Scalfaro, although ex-DC, had been very supportive of the magistrates and didn’t like the political newcomer Berlusconi.

Then only six brief months after the electoral results the Northern League, backed by Scalfaro, changed alliances. On December 22, Berlusconi resigned and former central banker Lamberto Dini headed a technical government lasting until the 1996 elections. It was a moment of political truce in Italy. The traumatized left tried to reorganize after the defeat. Berlusconi also went to set his shop in order. He used the lull to get his finances in shape by at long last listing his companies in the Stock market and thus raising a lot of money which then bolstered his party. On the eve of the May 1996 elections, both sides appeared stronger, but in very different ways.

Dini ruled with difficulties. The right wing accused president Scalfaro of having staged a coup because he had persuaded the Northern League to change alliances and betray the wishes of the voters, who had chosen the coalition headed by Berlusconi. Meanwhile, with the support of the Dini government, Berlusconi had managed to list his company Fininvest, and eventually after decades of controversy on the murky composition of his stockholding structure, he presented his companies to the public. His companies were then transparent and flush with cash. His economic problems were solved, and so some left-wingers hoped he might fade away from politics. Commentators were suspicious of a hidden pact between Berlusconi and the left, then headed by Massimo D’Alema: if Berlusconi got the left-wing judges “persecuting” him off his back, in return he would step back from politics.

16.4 Prodi challenges and defeats Berlusconi

The government of Lamberto Dini fell amid huge controversies, and in May 1996 the Italians were called back to the ballot box. The left apparently had learned a lesson from the failure of the previous elections: Italians are scared of communists, no matter if they change name or color, but they accepted that Romano Prodi would head the coalition. Prodi was a former left-leaning DC, with no government experience, so he was clear of all suspicions in the clean hands scandal. For many years he was CEO of state-controlled IRI, the largest Italian industrial complex. He thus was a non-communist successful businessman, like Berlusconi, but unlike him not tainted by scandals. Prodi was the ideal candidate to win a confrontation against Berlusconi. All the left lined up behind him, from the communist-nostalgic Communist Re-foundation to the ex-DC, suspicious of the curt and abrupt manners of the Berlusconi camp. In fact Prodi won, and with his victory some on the left thought Berlusconi was a specter of the past. With a government with a clear left-leaning mandate and some magistrates keen on sending Berlusconi to prison for alleged corruption, the season of this man had ended, thought the Left. Prodi won and set up a government that was set to change everything in Italy, also finding a political compromise with the Right.

Things however turned out very differently. The political situation was very confused and Prodi was the head of an even more confused coalition of big and small parties including people claiming to be still communist, ex communists and ex DC. Prodi, besides, did not control any of these parties and was hostage of the unstable pulls of this coalition.

Part of the political deal of the Left with Berlusconi was to set up a constitutional commission that would draw new political rules and undercut the power of magistrates. This power proved very difficult to whittle down. Magistrates were the main front in the ongoing war against the Mafia, and many inside and out of Italy were afraid that without judges truly independent from politics, politicians were too corrupt to resist the lure of the Mafiosi. At the time, the fight against corruption was an extension of that against the Mafia. Moreover, elements emerged possibly linking Berlusconi to the Mafia, which allegedly might have laundered some money through his companies at the beginning of his career. Lastly, although many magistrates were supportive of the PDS, they were in no way controlled or controllable by PDS.

In this situation, if PDS proceeded to change the law and rein in the magistrates’ power, it would lose the support of many of its core voters. Therefore, the PDS had difficulty fulfilling its part of the bargain with Berlusconi, and thus for Berlusconi it became very risky to go ahead and talk to the left for fear of being taken into a vice between both the magistrates and the Left-wing opposition. It was imperative for him to gain power and thus try to control the condition by himself.

The opposition against the Prodi government increased, and he reached out to members of the extreme left, the Communist Re-foundation. These were dissatisfied with Prodi, considered too rightist. Prodi in fact was increasing taxation and cutting public spending in order to meet the requirements of the Maastricht treaty for the European Union that would lead to the united currency, the euro, in the next few years. More taxes and less spending was making Prodi extremely unpopular on all fronts. Actually Prodi, after many years of delay, was addressing and trying to curb the excessive deficit, the interest payment for which had now become one of the largest expenses in the Italian budget. But requirements from international treaties and basic principles of governance had little pull in an extremely volatile situation where popular sentiment could easily be stirred up.

In October 1998, Prodi’s government fell as some of the Re-foundation communists voted against him and PDS leader D’Alema stepped in as prime minister amid suspicion of foul play. Given the growing tension with Berlusconi, D’Alema might have thought he could better control the situation. After all, unlike Prodi, he was the leader of the biggest party in Italy, and he was the man who had been dealing with Berlusconi and the magistrates. In balancing all these different forces he might be better than the economist Prodi who did not have enough support in parliament.

For Italy it was a historical moment: D’Alema was the first former communist to become prime minister of a NATO country and the first prime minister of Italy born after Italy became a Republic in 1946. He rushed to prove his loyalty to the transatlantic alliance. While D’Alema was prime minister, Italy took part in the NATO bombing of the Federal Republic of Yugoslavia in 1999. The attack was supported by Silvio Berlusconi and the center-right opposition, but the far left strongly contested it, which also helped to undermine his government.

Far worse for him was the economy. Without the support of the far left, D’Alema slowed down the program of economic cuts and improvements, while Berlusconi’s hold on media power became stronger. During his tenure, the parliament approved a law regulating the TV access of politicians, trying to limit the exposure Berlusconi could have with the firepower of his networks. But Berlusconi, now financially healthy and in control of the popular medium of TV, started to ride the popular sentiment against the financial discipline preached by the left-wing government in order to join the euro. The political tide was changing.

Prodi, the person who won the election against Berlusconi, wanted to get the Italian economy in shape, and wanted it to join the euro, was “exiled” to Brussels, suggested by the Italians as president of the European Commission. The appointment was highly prestigious but away from the nuts and bolts of Italian politics. The magistrates were pressing on Berlusconi, thinking that no political solution suitable for their idea of legality would emerge from the parliament. The extreme left protested against the sacrifices demanded in the name of joining the union. D’Alema lost the delicate regional election in Lazio, the area around Rome, and soon things started unfolding. On April 25, 2000 the D’Alema government fell, and Berlusconi won the new elections in a landslide.

16.5 Joining the euro in 1999; Prodi’s push for and failure of greater integration

In the early 1990s, the Europeans did not find consensus to act in Yugoslavia and stop the conflict ravaging the region. Unlike almost a century earlier, before World War I, Russia was too engrossed into its own post-Soviet troubles to have the time, disposition, and energy to support the Serbs. The US was concerned with setting up a new commercial and economic order based on its new vision of globalization and a more comprehensive World Trade Agreement (WTO), which was replacing the old agreement on tariffs, GATT; and its focus was moving to Asia and away from Europe.

However, the fight in Yugoslavia between statelets who wished to become independent and Serbia, which wanted to keep the union, was also tearing Europe apart. Germany, dragged by Austria, was more supportive of the pulls from Slovenia and Croatia, once part of the Habsburg Empire. France, historically close to Belgrade, was suspicious of German reach into areas outside of the union and into its ancient past. These tensions were creating enormous tension between the European countries, and especially between France and Germany. These two had buried centuries of conflict after the end of World War II and after the Americans in the 1950s inspired a new sense of history and purpose against communism and away from their decades of wars.

War in Yugoslavia would not spread to Europe, as it had happened with World War I but could possibly break the union, which was also bitterly divided on what to do with the former Soviet Empire and Russia. Many of those states, once under the Soviet cloak, were eager to join the European Union and NATO to speed up their economic recovery and stave off possible future Russian encroachments. However, there were different opinions in Western Europe about letting Eastern Europeans in the union. The issues were about who should join and on what conditions. France and UK were less keen on the EU moving east, something that they believed was more likely to further expand Germany’s influence. Germany, conversely, just for those reasons, was pushing the eastward movement. This inclusion would also bolster Germany with the USA. America saw the EU expansion as a way to weaken the fabric and speed of the political union of Europe. A union with more countries, many of which newcomers to the rules of western Europe, many driven by strong nationalist agendas, loyal to America, which had helped against the USSR, were less likely to bring about a European political union. This union would de facto rebalance the US.

The European countries were afraid that if Yugoslavia was allowed to fester, the rift between European countries could soon grow and the hard-won post–World War II peace could be compromised. However, they were suspicious of each other and could not find consensus on how to intervene so they practically begged the Americans to move into Yugoslavia to stop the escalation. The US did so eventually, fearing that a lack of intervention could cause the conflict to spread in Europe. In all this Germany managed to push its agenda for Yugoslavia, which was to favor a break up versus the union backed by Serbia and Russia. Moscow in the meantime was slowly emerging from its post-Soviet slumber. Dividing Yugoslavia could be useful to minimize Russia’s old foothold in the Balkans with the southern Slavs, something that both Europeans and Americans feared.

In this situation, a complex bargain was agreed upon between European countries and the US. The Europeans would have their united currency, the euro, which would further guarantee against possible future dangerous fissures between European states. But to make sure the united currency would not automatically lead to a political union, the EU would expand eastward to include former Soviet satellites. Moreover, the US wanted to make sure the euro would not be an alternative to the US dollar, and a currency without political unity could hardly be that. The key to the currency union was to stick to the agreed financial parameters that would bring all economies together.

Prodi was the man in charge of making this happen during his tenure as president of the EU commission. In 2002, eleven EU member states left their national currencies and adopted the euro as their single currency. In 2004, still during Prodi’s presidency, the EU was enlarged to admit several more member nations, most formerly part of the Soviet bloc. As well as the enlargement and the Amsterdam Treaty, the Prodi Commission also saw the signing and enforcement of the Treaty of Nice, as well as the conclusion and signing of the European Constitution in which he introduced the “convention method” of negotiation. Prodi’s mandate expired on November 18, 2004, whereupon he returned to domestic politics.

It was a huge political success for Prodi, but for Italy it was the beginning of a difficult period. Italy pressed to join the united currency, although its economy was far from the performance of the German economy. The idea behind it was that by now Italian politics was out of control and fraught by petty fights, and it needed external pressures to fall into line and solve the deficit problem, a legacy of the 1980s.

In Italy, priorities were different. In 2001 Berlusconi won the elections and started to have a very good relationship with George W. Bush, just elected US president. Berlusconi’s Italy promoted itself as the most pro-American country in Europe, in a moment of attrition between Europe and the US on the euro and its consequences.

Firstly, he undertook to simplify the complex tax system by introducing just two tax rates (33% for those earning over 100,000 euros, and 23% for anyone earning less than that figure; anyone earning less than 11,000 euros a year would not be taxed). Secondly, he promised to halve the unemployment rate and create one million new jobs. Thirdly, he undertook to finance and develop a massive new public works program. Fourthly, he promised to raise the minimum monthly pension rate to 516 euros. Fifthly, he would suppress the crime wave by introducing police officers to patrol all local zones and areas in Italy’s major cities[3].

None of these promises had much to do with the necessities dictated by Europe of bringing down the public deficit. In fact, Berlusconi squandered his success. The wave of support for the magistrates was waning, but he did not fulfill at least four of his five electoral promises. Italians perceived that he was keener on pursuing his own private business rather than doing something for the country. At that time Berlusconi started to have private business dealings with Russian president Vladimir Putin and Libyan leader Muammar Gadhafi concerning oil sales to Europe and the Italian support for a controversial Russian project, the South Stream pipeline.

This pipeline would be a route for Russian oil and gas sold to Europe, going through the Black Sea and the Mediterranean. As an alternative to the pipeline going through Ukraine and Poland (both countries were exacting high passage fees and allegedly stealing gas from it), it could serve to put pressure on restive Ukraine and Poland. Moreover South Stream was alternative to an American-sponsored pipeline, Nabucco, bringing Central Asian gas from ex-Soviet republics, through the Caucasus and avoiding Russia, thus putting Russia under stress if needed.

In this case, Berlusconi’s personal interests brought him into conflict with the US.

Therefore in 2006, Berlusconi, although no longer under huge pressure from the magistrates, did not have enough internal and external support. He hence lost the elections to Prodi who came back from Brussels to run for prime minister.

16.6 Falling behind the rest of Europe, Prodi’s short-lived new government

In 2006, some 20 brief years after it had proudly overtaken the UK’s GDP to become the fifth-largest GDP in the world, Italy’s economy was dramatically falling behind the rest of Europe. While other countries had been fretting over their financial accounts, Rome was mired in its own internal confusion and infighting as the country moved to elections once again.

The general elections on April 9 of that year were ultimately indecisive. Prodi, once again the leader of the left, won by just a few thousands votes, which granted him a scant majority premium at the parliament. Berlusconi contested the result and demanded a recount, which narrowed the difference but did not change the result. This was only the beginning of the problems. Prodi’s government was made by an alliance of parties, some quite small, and he just had a few deputies directly loyal to him, the rest had allegiance to their leaders. Despite the new coalition’s calls for greater efficiency, the government had to make all members of the alliance happy, and therefore had a disproportionate large number of ministers and vice ministers who fought between themselves far more than against the right wing.

The victory of the left itself had been almost an accident due to the new law granting Italians living or born abroad the right to vote and elect their own local deputies (people from Argentina or Australia) to the Italian parliament. Some 42% percent of eligible voters abroad participated in the elections. Prodi managed to secure four of the six senate seats granted abroad, while Berlusconi’s Forza Italia and an independent candidate each gained one of the remaining two seats. This aided Prodi in gaining a crucial majority in the Italian Senate.

The new law was actually passed by the right on the assumption that Italian citizens living abroad were more conservative and more pro-Berlusconi than those living in Italy. The opposite was in reality true. These citizens read the international press, which had been raucously anti-Berlusconi. Before the elections, many of those newspapers had accused Berlusconi of being essentially “unfit to lead Italy.” Besides all his problems, Berlusconi had simply not taken into account the power the international public opinion, contenting himself with his ostentatious friendships with Bush and Putin.

The international press corps read the serious Italian press, firmly anti-Berlusconi, and scorned Italian TV, more loyal to the media tycoon. In fact, the media scene, which had so much contributed to Berlusconi’s rise, in those years was changing rapidly. Anglo-American-Australian magnate Rupert Murdoch had set up business in Italy with his new cable service Fox TV. He had tried before to buy off Berlusconi, but the Italian eventually turned down the offer.

This time Murdoch was de facto competing with RAI (the Italian state TV) and Berlusconi’s network by offering something that had practically disappeared from the Italian market, unbiased and straight news coverage on TV. The offer however was limited to people willing to buy the new cable service. The new entry started to change the media landscape.

But this was to take place in a few years. Almost immediately after the elections, Prodi’s razor-thin majority became vexed by bitter and often petty struggles. Di Pietro, once the magistrate persecuting Berlusconi and corrupt politicians, had formed a party that scored only a modest percentage. This is evidence also of the dwindling clout and trust common people have for magistrates and politicians.

Berlusconi started courting individual deputies of the left, which further undercut the majority. Early in 2008 Prodi’s government fell and there was a general election again. Here Berlusconi had an easy time arguing that the left was squabbling and unable to rule the country. The tycoon thus won with a massive, unprecedented majority and almost immediately disappointed many of his voters by appointing to be his ministers young, beautiful girls rumored to be his mistresses. It was their only apparent talent. The left and the international press were up in arms over these appointments, but there was more to it.

During his previous post as prime minister, Berlusconi had chosen a number of university professors and intellectuals to be his ministers, however many of them proved to be too independent to toe Berlusconi’s line. Berlusconi this time wanted to be more in control and the only survivor of the old team was former finance minister Giulio Tremonti, who with Deputy Prime Minister Gianni Letta quickly came to gain control of the workings of the government, while Berlusconi gradually withdrew from day-to-day management.

Whatever, Berlusconi’s intentions might have been, they were soon abandoned. In the autumn of 2008, the US financial crisis brought back with vengeance the old issue of the excessive debt-to-GDP ratio of Italy’s economy. Europe was bound by a common pact for low inflation and a united currency, despite many different economies and different priorities. So, when in 2009 the Greek economy started to wobble, the EU failed to intervene immediately, triggering further stress on the euro and shaking the Italian economy and political system.

Italy was subject to international pressure because of its failing economy and Berlusconi came under growing scrutiny for his personal life. A trickle of detailed gossip about his “bunga-bunga parties” with dozens of easy girls emerged. There was nothing strictly illegal at first: he was divorced and could have a good time. Many Italians after all sided with him for living a good life they would want for themselves. The same had been true when Berlusconi had earlier been accused of being unfair and having made his friends rich. To that Italians reacted by thinking, Berlusconi is a stand up man who helps his friends and does not simply look after himself and his family. This time it was the same.

But it was no longer just an Italian internal affair. After the crisis in Greece, Italy emerged as the largest loose cannon in international politics. It was just too big to be bailed out like Greece, a crash of its economy could have brought down the euro and started a gigantic financial crisis. Italy seemed rudderless for a couple of years. It was told to think about the economy but the prime minister was thinking of fending off sex scandals. Possibly also nobody trusted Berlusconi in the west because of his alleged business connections with Russia and Libya at a time when American and Western ties with both countries were growing tense.

In these very confusing times, in the summer 2011, it is possible that the Italian government was thinking of a sudden withdrawal from the euro, a move that could have started an international economic meltdown. Amidst contrasting rumors, immense international pressure, and the sudden collapse of Berlusconi’s personal listed assets, Berlusconi was forced to step down and then president Giorgio Napolitano appointed economist Mario Monti to head a new technical government with the urgent task of rescuing Italy.

Monti bought some time with international public opinion, but failed miserably in his economic performance. He basically increased taxes and depressed Italian economic performance. The 2013 elections were a major defeat for him and his leadership. Italy had entered one of the most difficult times of its history and even the second republic was dead, while a new government had not emerged yet.

16.7 The rise and establishment of Italian fashion

In past decades, Italy’s economic and political growth has been not only linked to complicated intrigues in Rome but also owes something to Italy’s rise in global prominence in two camps: fashion and soccer.

At the beginning of the millennium, Italy was widely considered the capital of fashion, and all of Italy was its territory, with fashion houses spread all over the country. The history of fashion in Italy can be traced to the artistic overflow of the Renaissance. Then cities such as Palermo, Venice, Milan, Naples, Florence, and Vicenza started to produce luxury goods, hats, cosmetics, jewelry, and rich fabrics. Many of these goods reached Italy to be traded in Europe or were processed in Italy, and we saw the role of Florence in the key industry of wool dyeing.

From the 17th to early 20th centuries, Italian fashion lost its importance and luster, and Europe’s main trendsetters became France and England, with the great popularity of French fashion for women and English for men. This was possibly also due to more textiles beginning to be produced in these two countries with the Industrial Revolution. At the time, new steam-engine spinning and weaving machines, especially in England, soon replaced old hand-made products. Besides, the powerful the royal courts in Paris and London set the trends for all of Europe. In comparison, the power of the Italian courts was rapidly declining[4].

Things began to change only in the 1950s, with the miraculous economic growth of Italy in those years and the reemergence of almost-forgotten handcrafts, especially in processing leather. Ferragamo and Gucci, who initially started off producing shoes and bags, came to compete with English of French companies.

A major breakthrough arrived in the late 1950s and early 1960s. Italy became the place for Roman Holidays, as the popular Hollywood movie depicted, and home of the Dolce Vita, as in another movie, this time Italian. Hollywood stars and jet-setters like Grace Kelly, Peter Sellers, Audrey Hepburn, and Jacqueline Kennedy Onassis went to Rome, crowding the cafes of Via Veneto or roaming through the small alleys of Trastevere.

Until the 1970s, Italian fashion was mainly designed for rich and famous people, more or less like the French haute couture. Yet the revolution and great success came in the 1970s and ’80s, when Italian designers started to concentrate on the ready-to-wear clothes, prêt-à-porter, that until then were the second-class citizen of fashion.

The Italians started producing ready-to-wear clothes that had two specific characteristics: they were trendy and well designed, so they were ambitious although relatively cheap. In this way, Italian designers first recognized that a growing Western middle class had its eyes set on improving appearances, so that they may look as good as the rich donning tailored suites. Secondly, the Italians found a way of cutting their standardized clothes so that they would fit immediately or only with minor changes, just like tailored items.

It was a revolution in fashion and in shopping. Shopping for fashionable ladies used to be a visit to one particular store and a long process of looking at suits, maybe on an in-house model, and then trying on and fitting a few dresses. Not-so-rich people would just grab clothes at a department store or have them made by the little tailor next door.

Italy’s trendy prêt-à-porter broke the social divide on clothes and changed the manner of purchasing them. Rich and poor would go to the same store and purchase items without models or complicated fitting sessions. Moreover, people could hop from one store to another, visiting even dozens of them in a day, whereas before, because of the complicated procedures, they could see just a couple. This also brought down costs for shops, which did not need to employ models and tailors; and it brought down the price for customers and multiplied the number of shops.

The standardized, ready-to-wear later made it possible for these clothes to be sold and bought online, just by looking at a picture.

All fashion producers in the world followed the Italian example, which remains unique thanks to another feature. The designers worked and work closely with producers of accessories and textiles, who are also in Italy and concentrated in special districts. The personal connection between these three elements made and makes Italian fashion special. The three sides work together and get mutual inspiration. Many of the designers moreover started off as small industrialists or craftsmen, not as “artists” who know little or nothing of the materials and the goods they manufacture. Gucci and Zegna were leather and wool manufactures, respectively, who then branched out “downstream” to producing ready-to-wear clothes. In sales there are higher margins, but in the production of textiles or leather, there is also quality control and guaranteed supply.

This new conception of fashion built the most generalized concept of “Made in Italy,” a sort of brand expressing excellence of creativity and craftsmanship. Italian luxury goods are renowned for the high quality of their textiles and the perfect elegance and refinement that goes into making them. This branched out from the narrow world of fashion to furniture, home appliances, glasses, tiles, and materials for home refurbishing. The whole culture combining beauty and engineering all kinds of materials poured into the new concept of Made in Italy. It was as if the Renaissance found a new conduit in the industrialized age.

This went on to the food industry, as Italy founded the movement promoting a new approach to production and consumption of food called Slow Food, as the opposite of American-born fast food. Italy is thus contributing to an idea of a different lifestyle from the frantic industrialized ways of other Western countries.

Part of this lifestyle, for Italians, is also very much about soccer.

16.8 Italian soccer and its link with media development

For Italians, it is possibly the most important issue. Perhaps it is part of the legacy of the Roman panem and circenses (food and games to make the population happy) from old times; perhaps it is part of the lifestyle, as in the “Made of Italy” mark. Perhaps it is part of a national pride, as it is an activity where Italy can be happy with itself.

This pride, however, comes with some simplifications. Italy boasts it won four FIFA World Cups (in 1934, 1938, 1982, and 2006) trailing only Brazil (with 5); it was also runner-up in two finals (1970 and 1994) and third place once (1990). However the first two victories came when international football was very limited: England, the strongest team at the time, did not participate, and neither did many of the future champions, like Brazil and Argentina.

Perhaps the golden season of Italian football was between the two latest victories, in 1982 and 2006. The fever of that victory, the new wealth of the country intent in doubling its GDP and its public deficit, and the need to distract common people from the seduction of the ongoing terrorism brought tons of money into Italian soccer. The best players in the world were brought in and this soon made the Italian championship team the richest and most beautiful to watch in the world, also thanks to the Italian penchant for a tactical game.

These were the years when Italian football reached China, first through radio broadcasts and then in the mid and late 1980s through the live broadcast of a match every Wednesday. Football was so popular in Italy that owning a winning team was the path to glory, power, and influence. The carmaker Fiat group traditionally owned Juventus, the team with most victories. The oil-producing Moratti family had Inter, the second most decorated team, and in early 1986 Berlusconi, rich from his TV-network successes, bought the third team of the roster, A.C. Milan. Berlusconi revived the team, which had been declining for some years, invested heavily in it, and brought it back to its former glory. This was also very useful years later in Berlusconi’s path to power.

In these years, while Italy was importing players, it then started exporting coaches, who made the game in Europe more tactical. In the late 1990s, the popularity of Italian football worldwide and in China convinced media mogul Rupert Murdoch to move to Italy to buy the broadcasting rights of the Italian championship and bring over his successful TV network, Sky. The idea was also to have a bargaining chip with the Chinese government to enter the lucrative—and sensitive—Chinese TV market. The move did not get Murdoch through China’s door, but it changed the TV landscape in Italy.

Sky started competing with the national network, Rai, and with Berlusconi’s network, Mediaset, for broadcasting rights to soccer games, the most sought after and popular program on Italian television in the early 2000s. This pushed up broadcasting prices right at the time when the spread of the Internet and social media was drawing audiences away from TV, and TV signals were moving from old antennas (with limited bandwidth) to satellite (with almost unlimited room for stations). The offerings on traditional TV went from basically six channels (three for Rai and three for Mediaset) to hundreds, plus many youngsters simply didn’t watch TV but were glued to their computer or smartphone screens. All of this took place while the alarm bells to reform Italy’s overstretched economy grew louder, and thus there was less money to invest in the now over-pampered football teams. Meanwhile Berlusconi, who had been a major force in the revival of Italian football and its connection with new TV opportunities, missed out on the new media evolution, since he was absorbed in politics.

Italian football declined after the 2006 victory at the international FIFA championship because, with the 2008 financial crisis, there was much less money in Italy for games.

Italy’s football landscape in 2015 is now completely mutated. Foreign companies from Asia, namely Indonesia and Thailand, have bought into Inter and Milan; the owner of Juventus, Fiat, has moved its center of gravity out of Italy, to the United States. Italian soccer still gleams from its former glory, but the English and German championships outshine it for audience and global reception. This also means that the political gravitas of Berlusconi’s media empire counts for less, as so does the influence of soccer, creating a new social and political atmosphere in the country.

16.9 The new role of the popes after Wojtyla

John Paul II was the first non-Italian pope since the Dutch Pope Adrian VI, who served from 1522 to 1523, and the first Polish person to have a huge impact on the fall of communism[5], closely cooperating with the Reagan administration and the then-head of American intelligence, William Casey. Casey, campaign manager for Reagan and devout Catholic, played a large part in the shaping of Reagan’s foreign policy, particularly Reagan’s approach to Soviet international activity. Casey would fly secretly to Rome in a windowless C-141 black jet and “be taken undercover to the Vatican[6].”

Wojtyla played in fact a huge role in the fall of communism in the former Soviet empire and also in containing its spread in sensitive Latin America by cracking down on the Liberation theology, a theory that allegedly for conservatives had pushed priests mainly in Latin America but also in Africa to flirt with communist organization.

This was a new political role for the Vatican.

The power and influence of Rome had been declining steadily since the 16th century with the advance of the Muslim Turks in the Mediterranean and the rise of the reform that split Western Christendom. Catholic Rome managed to hold its power in the 16th century, under the protection of Hapsburgs and with the rise of the Jesuits. But in the 17th century, it became more marginalized, as the Habsburgs divided their empire and lost Protestant Holland. Meanwhile Catholic France was divided in a religious war between Catholics and Protestants, and Protestant England soon came to replace the clout of the Spanish Empire.

In the 18th century, the disbanding of the Jesuit order and their withdrawal from China, the superpower of the time, further sapped Vatican influence, which continued to exist thanks to French and Austrian protection. But then most of the monarchies in Europe were not Catholic and were hostile to the pope, a sentiment that was reinforced with the American and French revolutions.

The Vatican came to play a role in the fight against the rise of communism in Europe, but it is hard to gauge how fundamental that role was. Although Catholic Italy rejected communism in the 1948 elections and the Vatican had a strong part in that, Catholic countries like Poland and Hungary fell under the Soviets. It took Pope John XXIII, who called the Vatican Council II in the early 1960s, to start bringing the church back to the forefront of the international political debate. The church would become open to new demands from society without becoming revolutionary. Wojtyla increased the church’s influence and applied it against the USSR.

The pope who followed, Ratzinger, who took the name of Benedict XVI, knowingly or not actually followed this path by providing a strong theoretical basis for the fight against Muslim extremism, which became very important in the West after September 11. His September 12, 2006 address in Regensburg, Germany, which touched on Islam, became a beacon for conservatives worldwide against rising Islamic extremism. Here Benedict struck a very difficult balance, never endorsing calls for a religious crusade against the Muslims but conversely keeping open and improving ties with all religions including Islam.

His papacy however was marred by a huge controversy over child molestation that started in America. The controversy was a huge stain on the reputation of the church and also a direct threat to its finances. The US Catholic dioceses, to avoid being dragged into potentially scandalous court suits, settled the claims. These settlements bankrupted many dioceses and cut funds to the global church, as the American Catholics’ contributions account for some 60% of all Catholic donations. Moreover, the popular push to lift the statute of limitations on child molestation cases in America could have destroyed the church in the US and been a huge blow to the church globally.

Ratzinger was then under intense pressure and a growing trickle of news leaked directly from the inner chambers of the Vatican. Such news was mostly irrelevant, but hinted that someone in Rome had his or her hands—and could produce—secret correspondence between the pope and all important people of the world: very sensitive material indeed.

The leaks, culminating in the publication of a book, no matter how they are interpreted, were intended to show that Pope Benedict was unable to govern the church, which was torn by ferocious infighting between the most senior cardinals. This in turn proves that there was deep-seated, unrelenting opposition to this pope within the church, and because of the nature of this news, the opposition came from very close to the pope himself[7].

The leaks draw a subtle line between religious and temporal powers of this strange little state (the tiniest in the world) with a huge organization (the largest unitary religion on Earth, with over one billion followers, and influence over billions more). The spread of stories of Roman plots and conspiracies then de facto came to undermine the source of unity in the church, the central authority of the pope, just at a moment when it was regaining global reach.

The devastating result of the leaks in the end was the resignation of the pope, the first since the Middle Ages. This came after the pope’s butler was found with a chest full of documents Xeroxed from the pope’s office. With the resignation came a new pope, Giorgio Bergoglio, who took the name of Francis and would project the church beyond Europe.

After some three years of calm, the Vati-leaks came again in the autumn 2015, at the time of a crucial synod of bishops that focused on controversial positions relating to marriage, divorce, and sexuality.

It was in the middle of the synod’s three-week-long heated dialogue between the prelates, representing 1.2 billion Catholics worldwide, that three scandalous pieces of news surfaced. The first scandal emerged at the opening of the synod on October 3. A senior prelate of the Prefecture of the Doctrine of the Faith, almost the temple of Catholic orthodoxy, announced that he was gay and living with a partner. It was taken as a major affront during an assembly intended open a dialogue between conservatives and non-conservatives on the question of altering official church doctrine on sexuality.

The second scandal occurred a few days later, in the second week of the synod. Some Italian newspapers published a letter signed by 13 cardinals critical of Pope Francis’s ideas on the family—though it was later found that the letter was not the version handed to the pope and some of the cardinals never signed it. It is customary for cardinals, bishops, and even common priests to write to the pope on all kinds of issues with a range of opinions. However, the content of the letter, signed by 13 very authoritative cardinals, hinted clearly at a possible major split within the church. According to theologians, the letter put strict doctrinal limits on the pope’s ability to maneuver on family issues. The letter also suggested that any move by the pope on such tricky doctrinal grounds might lead to forcing the pontiff from his leadership of the church.

Lastly, on October 21, at the end of the synod, came the false news that Pope Francis was ill with a brain tumor. The information, which was immediately and strongly denied, was aimed at “undermining the authority of the pope, in a moment when many, in and out of the church, look to him[8].”

After that came two books, one written by the same author as the tome that shook Benedict’s papacy. It looked as if the process that prompted the resignation of Pope Benedict had been set in motion again against Pope Francis.

However, this time Vatican security promptly intervened by arresting Monsignor Luis Angel Vallejo Balda and Francesca Immacolata Chaouqui. They were accused of having leaked the documents to the journalists, who were also indicted. Vallejo served as the secretary of the Office of Account Revisions for the Vatican. To make matters worse, new press reports point to suspected Vatican involvement in money laundering, insider trading, and market manipulation.

Pope Francis is extremely popular with the common people, but is viewed as very contentious within part of the Vatican hierarchy. One reason for this is that Pope Francis has been undercutting many privileges of the curia, making some members resentful.

The slew of leaks involving Pope Benedict, in retrospect, were clearly geared to prepare for his succession. With the leaks, Benedict appeared to not be in control of the Holy See. The church seemed rudderless, an institution that demanded a radical change, possibly from somebody closer to the mighty curia.

This spate of attacks on Pope Francis show that the Holy See has once again become a focus of political power and intrigue after a lapse of many centuries. Plots were rife in Rome during the Middle Ages and the Renaissance, when the Catholic Church was pivotal in maintaining the balance of power in Europe. Conspiracies dwindled thereafter with the declining influence of the popes after the split with the northern European Protestants.

The growing political importance of the church reflects the massive global role it played in the latter stages of the Cold War and following that, in the face of the threat posed by Islamic extremism. Its increasing political prominence has been further fanned by the growing economic and social divide between rich and poor countries.

16.10 The new looming centrality of Rome, with the Vatican

Since 2013, there has been a steady rise in the profile of the Vatican and the pope in international affairs. This has deep historical roots: the failure in global leadership of the US, an international organization, or any other country. The Catholic Church filled a void. But in a way, this all started some 30 years before.

After the end of the Cold War, and with the beginning of the Clinton administration, the US gave a massive political push to the process of globalizing the economy and trade. The transformation of the old GATT (General Agreement of Tariffs and Trade) into the WTO (World Trade Organization) was part of that push. Somehow, America thought it could apply to everybody its own investment and trade rules. It was a time when people thought the world was flat, and this idea of flatness was boosted by the expansion of the Internet and mobile communications.

This process had a few snags. In the 1997–98 Asian financial crisis speculators managed to force the devaluation of the then mighty Japanese yen (then the second most important currency in the world) but failed to fell the Chinese yuan, whose exchange rate was protected by administrative measures. Since the late 1990s, China was benefitting more than the US from the new trade freedom, by flooding the world with ever cheaper exports. The global spread of the US dollar was arrested by the birth of a new currency, the euro, which would settle exchanges in the largest economic area in the world, Europe.

All of this was certainly not enough to stop the rise of America, but it was something unexpected. The world was not becoming flat, despite many promises in that regard.

Things became further complicated after 9/11. Since 2001, there have been wars in Afghanistan and Iraq, and in the following decade the US promoted a wave of jasmine revolutions in the Middle East. All failed to produce the expected results. Central Asia and the Middle East did not become a paradise for new trade and communications ruled by democratically elected governments. But this also didn’t start a major clash of civilizations, as some Western hawks had predicted.

All in all, America failed to impose on the world a new clear economic and political leadership. Meanwhile, everybody else failed as well to challenge the US leadership role. Europe, collectively or in any single country, failed to express the complex political and economic leadership the world needed. Russia tried to advance its own agenda, but there was no comparison with the old Soviet ambitions of global guidance, and China simply was not interested in gaining a lead role in the world. Moreover, the international institutions set up after World War 2, like the United Nations, also were becoming empty.

In other words, by 2016 for a quarter of a century, America failed to express the global leadership needed, but despite all its failings, no competitor managed to step in and replace it. All other “potential competitors” failed even worse than America.

Into this void came Pope George Bergoglio. In fact, the church spoke for peace before World Wars I and II, and it played an independent role during the Cold War by helping to bring down communism in Poland but saving in communist Cuba. But this role was not of major significance in a world dominated by superpower vying for total victory.

Yet, the failings of America’s leadership, compounded with the failings of America’s competitors to wrest power for themselves, had created a political void where the personality of Bergoglio brought the Holy See back to the international limelight and to a centrality that it last enjoyed during the Renaissance, before Christianity was fractured by the almost contemporary Muslim occupation of Orthodox Byzantine Empire (late 15th century) and the rise of Protestantism in northern Europe (early 16th century).

Into this new situation comes Bergoglio, talked to everybody and reached out to everybody, like the Jesuits in 16th century, the Franciscans in the 13th century—or Paul in the 1st century.

Bergoglio seemed to realize that confrontational policies were not working with China, Russia, or in the Middle East; neither was the idea of boiling everything down to equalizing the rules of trade, a clash of civilizations. This approach made inroads also in America. After centuries of suspicions about the role of the Pope, the United States in 2015 gave Bergoglio an unprecedented welcome. During the days of the visit the Pope obscured the then ongoing presidential campaign. Moreover, in April 2016 he met with US democratic candidate Bernie Sanders, who had flown to Rome to take part to a Vatican conference. The meeting was extremely delicate.

Although Sanders’ call for greater equality in American society clearly reflects some of the Pope concerns, Bergoglio doesn’t want to get involved in any way in an election, that is something against the grain of his religious mandate. But the global attention for the meeting proved that the Pope was appealing to people of all faiths, well beyond his Catholic constituency of 20-25% of the US population.

An even bigger consequence came from Bergoglio’s trip to the Greek island of Lesvos, also in April 2016, where he saw the refugees arrived there from the war zone in Syria.

Most of the refugees were Muslim, and he appealed for their welfare, took care of them, showed he was an advocate of their plight although they do not share his same faith. In fact, the catholic Pope was taking up the cause of these refugees, who happen to be Muslim, when no Islamic religious figure went or tried to go to Lesvos, spoke for them or offered them safe haven. The Pope, conversely, was arguing for them to be welcome and integrated in Christian Europe. The fact that he was the only religious figure taking care of suffering Muslims, de facto makes him the spiritual leader of moderate, suffering Muslims.

The consequences of his position are revolutionary and bound to be long-term for the whole political and social balance in the Middle East and Central Asia, home of many Muslims.

All of this is bringing back a long forgotten centrality of Rome in the world, also beyond its traditional western borders. This centrality of the Vatican happens to go hand in hand with a decline of the already minor importance of Italy in the world and in Europe.

16.11 Market or Rights, Italian Globalizing Experiment with Populism

The absolute market versus the absolute rights gave rise to a modern populism. Italy, long a political laboratory for the world, is almost an experiment. Can it be tamed, can we have a new order and can Humanism be the answer?

For a century Italy has been the laboratory of Western Politics. After World War 1, about 100 years ago Mussolini was the first to realize the importance of joining mass movement, socialistic slogans with nationalistic ambitions. This chemistry proved better grounded than previous internationalist claims of the original socialist movement and spread around very quickly.

Some seventy years later, at the fall of the Berlin Wall Berlusconi changed again the face of politics. Almost a modern Citizen Kane, Berlusconi used the full blast of his media empire, his economic clout combined with a new popular sensibility – feeding on some of the basest instincts of the masses, again effectively predating on youth movement experiences of the 1970s. The combination was extremely successful and possibly it was seminal in inspiring the rise to power of Donald Trump as president of the United States.

Then is the 5 Star Movement and the League government also a new page that will inspire politics worldwide? Certainly the massive use of Social media, bypassing TV and the traditional press is a new phenomenon. But also dropping traditional political divisions of right and left seems in line with worldwide new sensibilities. Then what is happening in Italy?

The following are scattered notes drafted on the basis on conversations with professor Vincenzo Scotti, ex Minister of Interior, Dean of Link University and allegedly close to the 5 Star Movement (senior partner in present coalition government), and with Giovanni Salvi, Procurator General of Rome. Any misunderstanding and error is exclusively my fault. After months of conversation in Italy I believe they offer interesting perspectives on the ongoing crisis political and social crisis in Italy and how some Italians see the global situation.

For Professor Scotti the long wave of Italian history that led to the populist movements may have begun with late 1970s. The end of the Gold Standard brought about a long disruptive season of high inflation[9]. Henry Paulson, as head of the FED, used monetary policies, high interest rates, to bring down and control inflation. Anti inflation policies destroyed bargaining leverage for the Trade Unions. Moreover, US Banks, loaded with fixed rates long term real estate loans went bust because of the new environment. Washington allowed a greater measure of liberalization to save the banking system.

Then in the 1990s, real estate liberalization (allowing poorer people to buy houses with cheaper loans), further financial liberalization, sales of US debt internationally and then waste in failing war efforts since 2002, created the mix that brought to the 2008 financial crisis.

This situation brought about the massive market liberalization in the 1980s, just as socialism was the byproduct of the early freewheeling process of capitalism and industrialization in the 1700s. The philosophical inspiration of all this was the Monetarist drive of the Chicago school and the Reagan administration.

Therefore in a few points:

• In the early 1980s, social conflicts were to be resolved by the market and de facto torn away from the public social and political debate.

• It ended politics as it had been conceived for 200 years, since the French Revolution, when the state, social bodies, or public debate mediated between interests and conflicting pressures.

• The bilateral negotiation between social forces was supposed to begin in an intellectual environment where the laws of development and more efficient accumulation of wealth are the dominant principles.

• Ideally, we would return to a situation of early capitalism, of the 1700s in Britain, when the productive forces wanted to affirm their emergence and strength against the constituted interests of the past: the commons of the common people and the privileges of the aristocracy. As the state defended the new productive forces then, in the 1980s the state had to support the new liberalism.

This was combined with the advent of the Internet and of the telecommunications revolution, putting a turbo engine on this liberalization (just as the Industrial Revolution in the 1700s was a consequence and accelerator of Adam Smith’s liberalism). Communication times are shortened, and therefore the processes of decision-making and reflection become more and more efficient, increasingly eliminating the human element and accelerating mechanization.

This freed the productive forces that also helped bring on the fall of the Soviet empire, which in turn freed the geographical limits on the diffusion of new businesses and intensified delocalization. The end of the USSR and the failure of the communist project, therefore, also eliminated an ideological obstacle to monetarist ideas.

This freed up gigantic production dynamics and created an opening for the globalization of markets and finance. People start moving production locations, according to financial convenience. Similarly, taxes were beginning to be paid no longer to a single state, but were spread in various states according to the financial convenience.

Clash of cultures

With hindsight, the efforts of the last two centuries, after the French Revolution, was to create mechanisms of mediation and compromise between market forces and exploitation of people. In this, the radical answer (that goes from Marat-Rousseau to Marx to Lenin) is that the ideal of equality/dictatorship of the proletariat will oppose the heartless rigor of the market rules. This was based on the idea of ​​a general will (interpreted by those workers’ leaders who know) and the redistribution of the surplus labor quota identified by Marxists.

With the end of the USSR, the ideal of readjusting the market mechanism in a positive way (through radical revolution or social democratic reform) collapses. Therefore, the ideal of having a very free market becomes stronger than ever, without barriers that are ideological (socialism in all its forms is swept away) or geographical (the Soviet empire, with its different rules, disappears).

Therefore, an idea of politics that combines thought and heart (a rational project and feeling toward the other), against the absolute market of the late 18th century and the 1980s, and the radical popular movements, falls apart.

In the 1980s Italy becomes the testing ground for experimenting with a post-politics led by television magnate Silvio Berlusconi (in turn inspired by Reagan, a former actor). He promises millions of jobs, like indestructible pots, like forever love promised to a night’s girlfriend. If the pots scratch and break, if at dawn the engagement breaks, well but the pot was still strong, the love of an intense night like was that of a lifetime, and then this is life—like the millions of works that do not materialize.

Political culture turns into a show. Marxism-maximalism was an ideal, a counterculture that needed a mainstream culture to fight. If the counterculture ends, there is no need for the mainstream culture. In fact, the Marxists wanted to establish a cultural hegemony and become the mainstream culture. Moreover, if mediation between legitimate interests (those of the capital and those of the workers, for example) is superfluous and everything is entrusted to the market, there is no need for a culture to provide social mediation.

Right around the end of communism, popular TV, a medium spreading a “non-culture” that despises high culture was born. Those TV programs were hugely successful because they appealed to an audience that had been forgotten—the ones with little culture, who would barely read any book. In Italy those were Berlusconi’s commercial TV stations, following a trend that had occurred also in America. These stations promoted the idea that non-culture (ignorance, not reading) was a culture, as legitimate as the bookish culture. It was the foundation that eventually led to the spread of “fake news.”

However, Berlusconi was still within the old Italian political mold – he had an organized Party, he moved within the idea of a left-right divide, where the entrepreneur has to look after the interests of the lower classes and mediation is crucial. The 5 Star Movement M5s, born after the 2008 financial crisis, is outside of it—it is the new generation of the policies of absolute rights against the absolute market. In fact, the rise of the idea that market is governed by absolute legitimate rules, brings about the idea that there are absolute rights that mustn’t be crushed by the market – the human rights, the rights of the women, the rights to the water et cetera. In an atmosphere of political mediation rights were the recompense of duties performed (you behave well you have the right to be respected; you work you have the right to your pay). In an environment where market rules for economic growth are paramount the idea of absolute “rights” is the only defense and they are the absolute “speed bumps” on the otherwise unfettered run of free market.

They are no longer connected to duties and responsibilities, as it had been for two centuries, but they are “human,” inherent to man and universal to everyone everywhere. From this, we then go straight to the body, or to life and death; to work; to the preservation of the nation; to maintaining the status quo; the right to water; and questions of identity, ethnicity, and so on. Not all rights can be negotiated, those that are very hot (made of pure emotions and as such not negotiable) become “speed bumps,” of the cold logic of the market.

It is a philosophical move that passes from the policy of ideals (made from ideas, which are from the brain, but also from the heart, i.e. attention to the needs of others) to the policy of emotion (that come of the belly). The ideal has as its premise empathy for the motivations and the malaise of others; the emotions are born and live by themselves, are selfish and possibly impervious to the emotions of others.

It is a crisis of traditional politics: people reject politics, both the holders of wealth and the bureaucrats (godparents of the mechanisms of the market or the state), and the common people “suffer” from the policy.

Cracks in the International order

However, while in theory there is seems to be good reason to hark back to a time of political mediation, massive economic innovation is the result of great market freedom. Why doesn’t Europe have tech giants, like in the US or China? Because to have a successful tech company one needs to invest in hundreds of them, and then close them immediately when they don’t perform. In Europe because of trade union issues it is impossible to close down rapidly companies, and banks then don’t want to be sucked in possible failures. So, it is very hard to start new growth engines here, and there is no hope of revolutionary growth. Traditional industries can improve their performance, but also the traditional industries are under performing.

In Europe at the turn of the millennium German-style capitalism, of alliances and great agreement between the parties, ends. In those years at the international level, the new situations also leads to end the politics of multilateral agreements according to political ideals: the UN, Bretton Woods, the IMF, and the European single market, are weakening because were based on an agreement of shared ideals between states.

Traditional reformers face a crisis because it reduces the space to mediate. There are the needs of the market and production on the one hand, with absolute needs to which others must adapt. On the other hand, this absolutizing of market needs—cold, unsentimental, and for this reason expressed in numbers—gives rise to an absolutizing of “rights.”

The right of M5s and the future of politics

People who reject politics (considered at the service of “strong powers”: rich men, politicians, et cetera) push for a revolution based on rejection, on the absolutizing their own particular thinking and feeling, and on the EXIT emotion. They want change (without content) and make calls for the recognition of dignity, laws, specificity, or a particular identity.

In this, politics ceases to be a representation of the will of a part of society that tries to compromise with another part. Thanks to the harnessing of emotional politics through the Internet, politics becomes a direct megaphone of “popular will.”

Today M5s claims parliamentary politics is superfluous. This is a consequence of the policies dictated by daily opinion polls, fairly close relatives of online surveys, and not of medium- to long-term programs.

The problem is that there is no reference culture to address even basic issues, and technically politics cannot do without culture. This is permissible when there are very strong apparatuses, like in America. There, a president-elect may have no culture, but officials are all career professionals and can pull weight. But in Italy, where the political elections permeate everything, and in the last 20–30 years, the state apparatus has been very weakened, if politicians do not know how to govern, how can the country move forward?

Moreover, the culture of Judeo-Christian tradition is in crisis and the transatlantic relationship is also in crisis, although these were always the leading culture and main international relationship.

The Pope unhooked the church from the necessity of a bond with Judeo-Christian tradition in order to not overwhelm the church with this cultural crisis and to give the church a new life in Asia, home to 60% of humanity and the majority of economic growth.

This leaves the desperate screams of protests for trampled “rights” even more alone. And they are lost.

But the market and the state are two sides of the same coin. Without the state and its rules and laws, a fair, transparent, and efficient market does not exist. Without equanimity and without mediation from social groups and fair news coverage, the market returns the exchange of the old Greek God Hermes—a system of theft, piracy, interpretation, cheating, and movement of goods with minimal use of force, but with a threat of force on both sides.

With the state, society, and fair news coverage, everyone wins in the exchange. With “pure exchange”—without state-society-public opinion overview—one side wins and one loses, which creates resentment, desire for revenge, and rancor. It is the root of a potential future violent clash—this time harsher than before.

The other option is eliminating the vanquished every time, which has other costs and other contraindications. Therefore, we need a new humanism and a new dialogue within these new dynamics.

finis

[1] For this, I relied on extensive conversations over the years with then Italian Foreign Minister De Michelis, who was the actual driver of the Maastricht agreement.

[2] See “Italy: the real effects of inflation and disinflation” (paper from the Bocconi University website) by Francesco Giavazzi and Luigi Spaventa, and conversation with Giavazzi

[3] Ricolfi, Luca. Dossier Italia: a che punto è il ‘contratto con gli italiani. Il mulino. 2005.

[4] See also “The birth of italian fashion,” Gbgiorgini.it. Retrieved May 5, 2009.

[5] See paragraph 15.7.

[6] See also “Officials say pope, Reagan shared Cold War data, but lacked alliance,” Catholic News Service. November 17, 2004.

[7] See http://www.atimes.com/atimes/Global_Economy/NF20Dj04.html and http://atimes.com/2015/11/the-vatican-returns-as-a-global-hotpot-of-political-intrigue/

[8] See http://vaticaninsider.lastampa.it/vaticano/dettaglio-articolo/articolo/sinodo-famiglia-44142/

[9] See Adam Tooze Crashed: how a decade of financial crisis changed the world, 2018 .