Matteo Renzi’s Plan A is to push through domestic reforms, hope the European Central Bank manages to get inflation ticking up, and keep his fingers crossed the Italian economy stops shrinking. But if this fails, a mega wealth tax, debt restructuring and/or exit from the euro beckons.
There is no Plan B that wouldn’t tip both Italy, where I spent part of last week, and its neighbours into a severe crisis. That makes it all the more important that Plan A works.
Renzi has been doing a reasonable job since he took over as prime minister in February. He has boundless energy and is not afraid of fighting battles. The latest has been to reform the labour market – something that involved clashing with members of his own centre-left Democratic Party as well as its trade union backers. Last week, he had to call a vote of confidence to push the change through the Senate.
Important reforms of civil justice, the electoral system and the constitution have also started. All this is necessary to make Italy governable as well as a country in which business wants to invest.
The snag is that the prime minister is better at announcing reforms than delivering them. This is partly a function of Italy’s stifling bureaucracy which, to be fair, he is trying to kick into action. But it is also because of his own failings.