Finance Finance News Italy’s Whitlam-style ‘dismissal’ sends Europe into turmoil

Italy’s Whitlam-style ‘dismissal’ sends Europe into turmoil

Italian president Sergio Mattarella at a press briefing on Sunday.
Italian president Sergio Mattarella at a press briefing on Sunday. Photo: Getty
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The Italian President’s decision to veto a ministerial appointment has sent Italy spiralling into a constitutional crisis akin to the dismissal of Gough Whitlam in 1975.

The move, which could force another general election, has sent shockwaves around Europe, with fears it could turn the increasingly eurosceptic Italian population even further against Brussels.

Investors continue to sell off Italian bonds, fearing a populist government could default on Italy’s massive debt, and cause the country to withdraw from Europe’s shared single currency the euro.

Until Sunday, Italy had been on track for a new government formed by a coalition of the populist Five-Star Movement and the right-wing League.

The coalition was hostile to Brussels and had promised a program of sweeping tax cuts, massive public spending and harsh treatment of undocumented migrants.

paolo savona carlo cottarelli
The President knocked back Paolo Savona, left, as economics minister and installed technocrat Carlo Cottarelli, right, as the new caretaker prime minister. Photos: AAP

But on Sunday Italian President Sergio Mattarella took the highly controversial step of vetoing the coalition’s choice of economics minister, on the grounds he might take Italy out of the euro.

“Uncertainty over our position on the euro has raised alarm among investors and savers, Italian and foreign, who have invested in our government bonds and in our companies,” the President said in a statement on Monday.

“The rising spread, day after day, increases our public debt and reduces government spending on new social initiatives.

“The losses on the stock exchange, day after day, burn the resources and savings of our companies and of those who have invested in them. And they configure a tangible risk for the savings of our citizens and for Italian families.”

Italy is the most indebted nation in Europe and the third-biggest borrower on the planet, with a debt-to-GDP ratio of a massive 132 per cent.

The President’s controversial move caused the populist coalition to collapse, forcing him – whose role is meant to be largely ceremonial – to appoint a caretaker government while the country prepares to go to the polls for a second time in under a year.

Another election could come as soon as July, reports suggest.

President Mattarella’s choice of caretaker prime minister, former IMF official Carlo Cottarelli, is controversial as he is seen as pro-austerity and too close to Brussels. Some predict his appointment could increase hostility to the European establishment.

Constitutional questions

The role of president in Italy is essentially a ceremonial one, similar to that of the governor-general in Australia or the monarch in the UK. He or she must sign legislation for it to become law, and must give his or her assent when a new party or coalition wants to form a government.

However, real executive power lies with the prime minister and cabinet, which are chosen by the party or coalition with a parliamentary majority, as in Australia.

President Mattarella’s decision to veto the coalition’s choice of finance minister, while technically legal, is therefore seen by critics as an encroachment on the democratic process – as governor-general John Kerr’s decision to dismiss prime minister Gough Whitlam was in 1975.

Despite this controversy, European leaders praised the President’s decision to intervene to prevent the formation of a eurosceptic government.

President Emmanuel Macron of France praised Mr Mattarella’s “courage” and “great spirit of responsibility”.

German MP Axel Schäfer said the Italian president had “stuck to the letter of the law,” while accusing “the populists” of showing “a lack of respect for the Italian constitution”.

But the Italian population remain highly supportive of populist parties Five-Star Movement and the League, meaning the coming election looks set to bring another anti-austerity, eurosceptic coalition to power.

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