EU Bureaucracy has Lost Control of Italy; Social Mood Turns Black

In Italy, former prime minister Silvio Berlusconi waged a full frontal attack on technocrat prime minister Mario Monti, Germany, Angela Merkel and the EU imposed austerity during a 1.5 hours press conference near Milan.

The problem for Brussels is Berlusconi can force a vote because by withdrawing his support to Monti's government, the current coalition will collapse.

The People of Liberty party needs to consider that "with a no-confidence vote by us, we would determine a situation that would be interpreted in a certain way by the financial markets and would cause early elections," Berlusconi told reporters yesterday near Milan. "We will consider these facts and decide whether to immediately withdraw our support of the government."

Such a step would likely force President Giorgio Napolitano to call early elections, before a vote due by May. It also would probably fan Europe's debt crisis, as Monti's austerity policies have contributed to a decline in Italy's bond yields, with markets more focused on Spain in recent months.

"It's impossible to say what is in Berlusconi's head now, but if he decides to end his support to Monti, early elections become almost inevitable," said Roberto D'Alimonte, a professor of politics at Rome's LUISS University. "Berlusconi would lose the elections anyway, but would likely get more votes thanks to an anti-austerity platform and that would increase his party's bargaining power in the next parliament."

In Sicily, exit polls show the candidate of Beppe Grillo's Movimento 5 Stelle (Giancarlo Cancellieri) as the winner for the Regional Governor position with 27% of the votes.

Reader "AM" who is from Italy but now lives in Hong Kong writes ...

Hello Mish

I am also an Italian citizen living in Hong Kong.  I have been away from Italy since 1995 but I still read and follow Italian (and European) news and politics. I believe the EU will not hold together over the medium term and some countries, for example Belgium, Italy and Spain, might not survive the collapse of the EU in the current form and might even break up.

Some headlines from the "Corriere della Sera"  from this weekend for your information that might turn out to be eventful over time and some related considerations of mine:

Record Vote Avoidance in Sicily

Key Points

• Only 47% of the people eligible voted yesterday in the regional elections in Sicily vs. close to 60% in 2008.
• The results will become available later today and there are no official exit polls, but one partial exit poll in the Palermo province projects the candidate of Beppe Grillo's Movimento 5 Stelle (Giancarlo Cancellieri) as the winner for the Regional Governor position with 27% of the votes.
• Whoever wins will not be able to govern Sicily without complex and likely most unstable alliances with other parties because of the extreme fragmentation due to the decline of the established parties.

The mainstream media is desperately trying to support the established parties, especially the moderate small political centre parties (including trying to break up Berlusconi's PdL party in order to ferry votes to the centre).

Their problem is that the centre and centre-left are crumbling. Instead of the rise of a moderate centre, the nationalistic and local right is rising: Movimento 5 Stelle is projected at over 20% of the national vote.

Berlusconi Attacks Monti and Germany

• Berlusconi is back with a frontal attack to Mario Monti, Germany, Angela Merkel and the EU imposed austerity during a 1.5 hours press conference near Milan on Saturday, 10/27.
• Berlusconi might withdraw support to Monti's government already this week leading to early national elections in January or February.  This will be fought tooth and nail by the Italian and EU establishments. 
• Berlusconi wanted to announce the withdrawal of his support for Monti's government already during the call on Saturday but his family and counselors managed to convince him ponder the decision for a few more days.

This is a major, major political event in Italy and in the EU

1. Berlusconi is back and might even form a new party if he cannot fully reform the PdL, his current party, part of which has been drifting toward supporting Monti for a second mandate.
2. Berlusconi can and will force a vote because by withdrawing his support to Monti's government, he is accelerating the events, forcing his opponents, such as the PD (Partito Democratico, the reformed communists) to quickly drop support for the current government too because it will be fatal to any party to get to the elections still supporting Monti which is now a major liability for anyone close to him and his government.
3. The EU bureaucrats have managed to impose an unelected government onto Italy but now the situation is exploding in their face and they seem to be genuinely surprised by the events i.e. the massive rise of the right in all its forms (localist, nationalist, radical, anti EU, anti Euro and populist).
4. The political situation in Italy is fragmenting into at least five major aggregation areas: i) PD (reformed communists) estimated at 25% of the national vote; ii) Movimento 5 Stelle at 20% to 30%; iii) Berlusconi, possibly with his new party, for which there are no estimates and which just announced an alliance with Lega Nord, let's pencil in 20% together with Lega Nord; iv)The moderate, fragmented, catholic centre supporting Monti which is rapidly losing strength and that we can model at 20%; v) The radical left (communists) at 10%;

The establishment is in panic. This was first page news on all Italian newspaper on Saturday evening and already on Sunday there has been a massive onslaught against Berlusconi from all sides.  Expect and EU onslaught shortly.

Think what you want about Berlusconi's ethics and morals but he has an uncanny ability to assess the secular mood (he is a media tycoon after all) and where popular sentiment is going and he has just seen a major opening now at the right of all established parties and against the EU.

Northern Italy has been fermenting with protests and is becoming radical.  The paradox is that the rich part of the country is collapsing under the Euro and the EU driven austerity, crushed by competition from Germany, competition from Asia and other emerging region with weaker currencies and improving technology and skills and by high commodity and energy costs.

Angela Merkel seems to have misread the situation, underestimated Berlusconi and made major strategic blunders by openly driving out Berlusconi and getting an enemy for life and by openly supporting the failed Sarkozy reelection bid. Sarkozy is now gone, Hollande is now openly confronting her and Berlusconi could be back, possibly indirectly pulling the levers of Italy's next government as party president.

Angela Merkel is increasingly despised in Italy (and beyond) with a speed which I found surprising. The social mood of the country is turning black very quickly.

Expect massive fireworks in Italy and in the EU shortly.  I believe that the EU bureaucracy has lost control of Italy but have not realized it yet. The EU is also about to lose control in Spain, Greece and possibly France.

Best Regards,
AM

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com