What the new coalition means for Italy – and why it matters for the left in Britain

The new government’s programme is the first coherent example in Europe of what I’ve called “neoliberalism in one country”.

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A citizens’ basic income of €780 a month, a fiscal stimulus, a national investment bank and a defiant middle finger to the European Commission should it dare stand in the way. There is a lot in the coalition agreement of the new Italian government for the left to like. But it comes laden with racism, nationalism, a commitment to conservative “family values” – and the promise of a war on undocumented migrants and the Roma community.

Above all, the economic programme of the coalition to be formed today by the populist Five Stars Movement and the right-wing xenophobes of the Northern Leagues, is firmly tilted towards the small state, free market policies of the latter. It is, in short, the first coherent example in Europe of what I’ve called “neoliberalism in one country”.

Most people on the Italian left assume, rightly, that it will fail in its own terms, destroying the popularity of the Five Star Movement in the process. But that’s of little comfort.

The rise of a hard-to-categorise populist movement, playing on the linked themes of corruption, organised crime and illegal immigration, has disoriented the traditional centre-left Democratic Party. If they, and the fragments assembled to their left, are to stand a chance of picking up the pieces when Italy’s experiment in free-market nationalism fails, huge changes in outlook and practice will be needed.

The programme agreed on Friday is a mish-mash, and leaves out the bloodcurdling promises of a leaked earlier draft to stage a confrontation with the EU. Its key elements are:

- A flat tax of 15 or 20 per cent, replacing the tax rates of 43 per cent and above that companies and some individuals have to pay. Combined with other pledges, this has been calculated to cost €126bn. Since there are few proposals to actually cut spending, it amounts to a fiscal stimulus significantly bigger than the one Labour proposed in 2017 and would break the EU’s budget deficit rules.

- Repudiation of the bank “bail in” rules imposed across the EU after the Cyprus crisis of 2013, which have forced Italian savers to bear some of the costs of saving their failing banking system

- A state investment bank, whose borrowing and sending are effectively exempted from the Maastricht limitations by means of “by means of “

- The creation of “centres” in each region for the collection of Italy’s estimated 500,000 undocumented migrants, mainly people who’ve fled Africa via the Mediterranean, and their deportation through bilateral agreements.

- The closure of informal Roma camps and the removal of Roma children from their families if they don’t attend school.

- The renegotiation of EU Treaties (which means the reversal of the Maastricht-Amsterdam-Lisbon treaty process which imposed permanent austerity on Southern Europe).

- Commitment to NATO while treating Russia as an ally and vetoing sanctions against Russia.

Crucially the agreement makes no clear commitment to implement the so-called mini-BoT as a parallel currency inside Italy – a project designed to erode Italy’s debt by loading liabilities on to other Eurozone countries - which would have put the new government on a collision course with the European Central Bank.

If implemented, the published programme would probably lead to a collapse in revenues to the Italian treasury, tax evasion on a vast scale, rising deficits and a rise in public debt, which already stands at 134 per cent of GDP. It would trigger, and is designed to trigger, some form of conflict with EC or the ECB.

The process of government formation reveals that though they only got 17 per cent of the vote, the Northern Leagues are pulling the strings. Their leader, Matteo Salvini, has seized the limelight personally, and the outcome of the programme negotiations reveals an obvious truth: a coherent programme of xenophobic nationalism and neoliberal economics will always beat a bunch of quasi-populist progressive rhetoric with no substance.

Salvini’s freemarket racism may have only gained 17 per cent, but it resonates with the soul of the wider Italian right – especially so long as its commitments to clean up corruption are allowed to founder on the usual problem – that corruption is endemic and pervades business and political life.

The decision to divide power in government, with Salvini as interior minister, Five Stars leader Di Maio getting the ministry of labour, and appointing the unknown economist Giuseppe Conte to be the figurehead prime minister, is also designed to boost Salvini in the long term.

The question for the Italian left is not what to do now, but how to prepare for the moment this first phase of right wing populist government hits crisis.

Populists like Salvini understand that – as Petyr Baelish puts it in Game of Thrones – “chaos is a ladder”. Salvini is a fan of Putin and Le Pen, and knows that the route to power for authoritarian right-wing nationalists is through the drama of increasingly chaotic situations.

The first drama will be the entry into government of a tangibly anti-establishment force. It will feel young, fresh, dynamic. It will hurl insults at everyone. In response, if it sticks to its normal modus operandi, the Italian left will deploy a bunch of jaded professors and technocrats who couldn’t hold a crowd in a piazza for five minutes.

The second drama will be when the government picks a fight with Europe. If the Italian left then follows its own self-destruct instinct, it will side with Europe, reinforcing the idea that the EU is an anti-democratic, alien force, and they its puppets.

The third drama will be when Salvini and co run out of money, and when the mass support of the bigger but more junior coalition partner, the Five Stars Movement, becomes restive, and demands more left and progressive measures.

If you had to write the script of Salvini’s response at this point it would be: ditch the progressive elements within Five Stars, swallow up the remnants of Berlusconi’s Forza Italia movement, and seal the deal by violently deporting some African street sellers and torching a few Roma camps.

This being Italy, the tempo of this drama might be quite fast. So what script should the left follow?

First, as I said in Milan earlier this year: ditch neoliberalism. Rip up the copy of the Lisbon Treaty that exists inside your heads and come up with a programme that actually solves the crisis of stagnation and low growth that the Eurozone imposes on countries like Italy.

That doesn’t mean leaving the Euro. It does mean a) fighting openly for a policy of high deficits, high growth and debt erosion/write off within the Eurozone and b) giving yourself freedom of action by creating parallel currency instruments, such as Yanis Varoufakis proposed for Greece during the 2015 crisis and such as the M5S/LN have discussed. It means breaking open by force the Maastricht debt and deficit rules.

Second: The national investment bank, the citizens’ minimum wage and the state investment plan in health, transport and education are all things a left-wing government should offer. To do so it has to fight for fiscal leeway within Europe and to reform the EU treaties in the direction of social justice.

Third: in complete contrast to the Italian right – the left has to fight for progressive taxation and state intervention. Their idea that growth alone can solve the problem of debt and deficit, without the need to tax the rich, tax assets and tax big corporations is a chimera.

Fourth: the left has to find ways of separating citizens’ genuine concerns over illegal migration from the general atmosphere of racism, and prevalence of ethno-nationalism in Italy. In the short term, that means disrupting the trafficking operations happening in North Africa, while respecting the right to claim asylum. It means offering undocumented migrants a route to regularisation, forcing Eastern European countries and Britain, to take their share of the new arrivals, and building an infrastructure that can absorb those already arrived. It also means facing down the far-left’s continual calls for “open borders”.

Finally, the left has to find popular leaders. Matteo Renzi, the leader of the Democratic Party, was touted as the Blair, the Obama and even the Macron of the left. He’s the opposite. Unfortunately, as we’ve found in Britain, social democratic parties that make peace with a dud system tend to attract generation after generation of dud politicians. All over Europe, left-wing intellectuals and technocrats seem to think it’s beneath their dignity to speak in the language of their own people; to speak of hope, pride, dignity, community and struggle.

The outcome of the struggle for Italy’s future matters here in Britain.

The new government represents the clearest possible break by an old NATO ally in the front against Putin. It will embolden voices both on the left and right of British politics who want to cede Ukraine, Georgia and the Baltics as spheres of influence to Russia.

Plus, insofar as it succeeds, Salvini’s attempt at Thatcherism in One Country will embolden those in Britain who want the same thing. Brexit is a shambles because the Tories know they cannot win an election with the hard Brexit project they want, yet they do not believe in the soft Brexit project that is being imposed on them by the EU27.

If the Tories had a populist leader, a mass movement and a street politics – of the kind that pickets kebab shops because they “pollute the national culture” – they would stand a chance of forcing hard Brexit down the throats of a British middle class and business elite that doesn’t really want it. That’s what Salvini has that Boris Johnson does not. Watch closely for the first Tory politician to pose for selfies with Salvini.

By the same token, helping the left in Italy revive, re-orientate and unite is an important task for British Labour.

The far-left Power to the People, which got just 370,000 votes and the left-social democrats of Free and Equal, which got 1.1 million have both laid claim to the mantle of Corbynism, and attempted to establish links with Momentum and Labour. The mainstream social democrats of the Democratic Party – which garnered more than six million votes - have a leadership that is wary of Corbynism, but contain important voices that are dissatisfied with Renzi and want a leftward orientation.

As in Germany, France and Spain, the left needs to find practical ways to unite – and to establish a common platform of all those who reject austerity, corruption and inequality.

Paul Mason is a New Statesman contributing writer, author and film-maker. As economics editor at Newsnight, then Channel 4 News he covered the global financial crisis, the Arab Spring, the Occupy movement and the Gaza war. His bestselling book Postcapitalism has been translated into 16 languages. His play Why It’s Kicking Off Everywhere was televised on BBC Two in 2017.