The Italian Debt/GDP ratio hysteria

The prospect of an Italian budget deficit of 2.4% of GDP has unleashed extraordinarily strong adverse comment by EU officials and politicians, from Draghi to Juncker, from Dombrovskys to Mattarella, to former ministers like Moscovici and Berlusconi (of all people!) who in their days in government have been among the worst offenders of EU austerity constraints: they actually claimed that the very existence of the Euro was under threat. They should have remained silent at least until greater details of the budget were unveiled, in order not to cause the market upset and rise in the spread between the yield on Italian and German bonds, that they ostensibly feared but in truth whipped up and welcomed with great enthusiasm.  They were aided and abetted by the media hysteria of Italian and European press and television; deputy premier Di Maio rightly spoke of “media terrorism”.

Concern was generally expressed about the sustainability of Italian debt, presumed to be reversing its recent course of slow but steady decline as a proportion of GDP. Yet the arithmetic of Debt/GDP ratio evolution over time is very simple and well known, and in no way justifies concerns for a budget deficit of 2.4%, nowhere near the sustainability limits. The point has been made only by Senator Alberto Bagnai, president of the 6^th permanent Commission for Finances of the Italian Senate, in various posts on his blog http://goofynomics.blogspot.com/, and is well worth a reminder.

The budget balance f* that stabilizes the debt/GDP ratio in year t is given by following relationship:

f* = d(t-1)*g/(1+g)

where d(t-1) is the debt/GDP ratio at the end of the previous year (t -1), and g is the nominal growth rate of GDP in period t. A budget balance lower than f* will necessarily involve a decline of the Debt/GDP ratio in the course of the same year t. This is not a controversial theory, nor rocket science or high mathematics, it is an incontrovertible relationship of simple arithmetic.

To calculate this critical magnitude of the budget balance that will stabilise the debt/GDP ratio in 2019, we need two values, both unknown in 2018 (i.e. today): the value of the debt/GDP ratio at end-year 2018, and the nominal growth rate in 2019. The IMF estimates that Italy’s Debt/GDP ratio at the end of 2018 will be 129.7% of GDP, while GDP nominal growth in 2019 would be 2.5%, made up of 1.13% growth, and about 1.4% inflation (IMF World Economic Outlook, April 2018). Subsequent updates lowered real growth by about one-tenth of a percent. Thus we can assume conservatively a 2019 real growth of 1% and 1.4% inflation, i.e. a nominal growth rate of 2.4%.

By the relationship mentioned above, the value of Deficit/GDP ratio f* sufficient to stabilize the Debt/GDP ratio is therefore:

f* = 1.297(0.024/1.024)=3.03%

(more precisely, 3.0398 i.e. almost 3.04%). The prospect of a 2.4% budget deficit amply satisfies this constraint, leaving considerable room for contingencies; as it happens, the 2.4% deficit target also happens to amply satisfy the Maastricht ceiling for the budget deficit (which no one proposed to violate). Indeed a deficit rise with respect to the level embodied in earlier growth estimates is bound to raise nominal growth as well above earlier estimates, something that Ministers Tria and Savona were quick to point out, but this is a minor additional argument in favour of current policies, with respect to the powerful implications of 2.4%<f*.

Loose and reckless talk is unbecoming of respectable officials and reporters. Regardless of whether it is due to incompetence or malice, it breeds distrust and contempt, though fortunately it also, in the end, raises popular support for the government.

Il Vecchio Glorioso Comunista

The re-election of Giorgio Napolitano on 20 April for a second seven-year term is an extraordinary event. Unprecedented in the Republic of Italy, not least because of a silent Constitution that neither prohibits nor specifically authorizes re-election (see Part II, Titolo II, art. 83-91). Most uncommon for a man of 88, one year older than the Queen of England and only junior - among Heads of State worldwide - to Robert Mugabe and Shimon Peres, and over six years older than the Italian male life expectancy at birth. Especially after so many previous, consistent and stern denials of such a prospect, labeled  by himself as "ridiculous". And accepting the post on the condition - not to be found in the Constitution, and requested only after re-election - that Parliament grants him effective Carte Blanche in the formation of the next Government. 

Admittedly any President can be better than no President, and financial markets (both the stock exchange and the market for government bonds) rejoiced at the news and the very prospect of a new government rather than none.  Whether initial market optimism was justified or groundless still remains to be seen.  For many Napolitano has been and is a Man of Providence, selfless and generous in the service of the country, an impartial custodian of the Constitution. But many others see him and his re-election at best as a mixed blessing, at worst as an unmitigated disaster.

On the one hand, Napolitano has the merits of being committed both to national unity and to Italy's European integration.  On the other hand, his understanding of such commitments is questionable.  For him, national unity is the avoidance of conflicts at any cost, and in particular the appeasement of Silvio Berlusconi, with the speedy presidential countersigning of ad personam laws favourable to him and his companies though subsequently declared unconstitutional, the postponement of a confidence vote in December 2010 that allowed Berlusconi time to illegally purchase additional parliamentary support, and the President's undue exhortations to magistrates to postpone Berlusconi's appearances in court and his sentencing in four open cases in the run up to the last elections.  While Napolitano's interpretation of Italy's interests in Europe is the total acquiescence to the obligations of EU and EMU, including the so-called Growth and Stability Pact that Romano Prodi at least had the courage to call "stupid", and the associated European austerity measures.

(In passing we might also mention Napolitano's political, outrageous use of pardon in the case of CIA agent Joseph Romano, convicted for Abu Omar's "military rendition" and torture, while pardon had been specifically restricted by the Constitutional Court to cases of compassion; his demand that phone tappings of four conversations of his with former Minister Mancino should be destroyed - as they were on the day of his re-election - regardless of their possible relevance to the investigation of State negotiations with the Mafia; and his continuous strong support for Italian military involvement in "peace-keeping" missions  in Iraq, Afghanistan, Libya and Lebanon).

What is worse, in the name of such questionable interpretations of well-meaning commitments Giorgio Napolitano has been perfectly willing to sacrifice democracy and the very same Constitution which he has sworn to observe and to which he has always vigorously paid lip-service.  An authoritarian streak, typical of a glorious old Communist in the tradition of Togliatti and Amendola, used to sacrifice everything, including his own party, in the name of a cause, has led him to transform Italy into a semi-presidential republic.  (For a lucid assessment of Napolitano's first seven years, see Thomas Mackinson, Il Fatto Quotidiano, 18 aprile 2013.

Back in November 2011, when Berlusconi resigned the Premiership, Giorgio Napolitano could have dissolved Parliament and called new elections: Berlusconi would have been steamrolled and buried forever.  Instead of which Napolitano appointed Mario Monti as life senator and pieced together a so-called "technocratic" government under Monti's leadership, backed by a Grand Coalition of PdL, UDC and PD, that squeezed economic life out of the country and led GDP further down a recessionary path. Napolitano's pretext for a technocratic government (of which as recently as 2010 he had denied the very concept) was the fear that Italian debt might become unsustainable. The fear, that is, that the spread between interest on Italian debt renewal and that on German Bunds - that under Berlusconi had escalated to over 500 points (i.e. 5%) on ten year bonds - might rise further during the electoral campaign and after the election if Parliament had been dissolved. 

Monti's austerity policies, predictably, instead of reducing the Debt/GDP ratio raised it to 127% by the time of the recent elections, poised to rise over 130%; though initially they had a small net favourable effect on the spread due to financial markets taking note of a renewed Italian commitment to repay debt.  But the spread fell significantly only in the summer of 2012, not thanks to Monti but as a result of Mario Draghi's resolve to do "all that it takes" to save the euro, and of his Outright Monetary Purchases approaching an ECB role as Lender of Last Resort.  If Napolitano had called an election in November 2011, it would have been won hands down by the PD, and markets would have rejoiced just as they did immediately after the elections of 24-25 February 2013 when they believed early exit polls wrongly giving victory to the PD. But that was a cruel delusion, the Italian electorate split three ways into three parts defying governability.

The PD coalition, whose campaign ruled out an alliance with PdL, gained by a whisker an artificial majority in the lower Chamber (thanks to the majority premium of an indecent electoral law passed by Berlusconi) but only a useless relative majority in the Senate, and was unable to form a government even with the support of Monti's coalition that had barely cleared the 10% threshold for entering the lower Chamber. The PdL coalition gained almost a third of the vote in both Chambers, was open to an alliance with PD but ruled out a technical government.  Beppe Grillo's 5Star Movement (the largest single party if we exclude Italian voters abroad) obtained almost another third but ruled out participation in any government, not least with Bersani's PD.

Pierluigi Bersani, the un-charismatic leader of the PD, tainted by 15 months complicity with Monti's recessionary policies (like the PdL, which at least had provoked Monti's fall before the end of the legislature), handicapped by a lack-lustre electoral campaign without either a programme or alternative policies, had always excluded most vigorously the continuation of a Grand Coalition that included Berlusconi.  Napolitano gave him an "exploratory" mandate, conditional on his obtaining a clear majority on paper before allowing him to seek a confidence vote in both Chambers, and quickly withdrew it with dubious constitutionality, in spite of the precedents of unconditional mandates.   The M5S followed a deplorable , indeed unforgivable, and self-defeating un-cooperative strategy, refusing to support a government led by Bersani, who in truth had offered only a vague programme of 8 points imitating some M5S policies, without offering them ministerial posts or negotiations about the choice of the Premier. 

Napolitano should have allowed Bersani to seek a confidence vote, which he had a fighting chance to obtain; even if he had lost, at least his government would have taken the place of Monti's government, that Napolitano undemocratically left in charge in spite of Monti's spectacular electoral defeat. Napolitano should then have explored an alternative, or resigned at once long before his tenure's expiry in mid-May, so as to speed up his replacement by a new President who could then proceed to dissolve Parliament and call new elections or seek to construct a new government on the strength of such a threat.

Instead of which Giorgio Napolitano temporised, wasted time and pre-judged the subsequent course of events, by appointing an improvised "Commission of Ten Wise Men", with the ambiguous role as "facilitators", totally outside Constitutional procedures, with the task of producing a draft programme for the new government. The so-called Wise Men were indeed all men in their middle to old age, exclusively from the parties that would be included in the a potential Grand Coalition.  A most peculiar procedure, in the absence of a candidate Premier, however pre-judging the subsequent appointment of a Premier who would then be effectively bound to endorse a Grand Coalition to accompany that particular programme.

What is worse, many of the ten appointees, tipped as potential Ministers in the future government, as it actually happened to four of them  - another extra-constitutional feature - were rather controversial, notable not so much for their wisdom as much as their representation of party kakistocracy (i.e. power of the worst, to coin an expression). See Marco Travaglio at Servizio Pubblico of 4 April. 

 

 - Filippo Bubbico (PD) former President of the Basilicata region, had been indicted four times and was still subject to one indictment for abuse of office, the author of a hare-brained, expensive and failed scheme to promote employment in his region by subsidising silk worms cultivation (sic).  

- Giancarlo Giorgetti, a Lega MP close to Bossi who then switched to Maroni's support, well connected in banking circles (Fioroni and Fazio), notorious for having taken a €100,000 bribe delivered directly by Fioroni at Montecitorio, though he returned it the same day recommending a donation to a sport association instead; his wife indicted for fraud against the state. 

- Enrico Giovannini, President of the Statistical Office, undoubtedly a competent statistician but never speaking on policy issues; he had been asked by Monti to conduct an investigation on the costs of politics and the salary differentials between Italian MPs (the highest paid in Europe) and MPs in the rest of Europe,  but after six months research in the end had declined alleging the difficulties of the task.

- Mario Mauro, a close associate of the unspeakable ex-President of Lombardy Roberto Formigoni, had switched to Monti at the last minute.  

- Enzo Moavero Milanesi, a EU official,  Minister for European Affairs in Monti's government.

 - Valerio  Onida, ex-President of the Constitutional Court, was on record both for backing Napolitano in his quarrel against the Palermo magistrates investigating the negotiations between mafia and the State, about phone tappings involving former Minister Mancino; and as arguing that the 1957 Law named after Sturzo, often invoked to allege Berlusconi's ineligibility to Parliament, did not apply on the Jesuitical argument that Berlusconi was neither the direct holder of a state concession of TV channels nor the manager of the company that was granted the concessions - glossing over the fact that Berlusconi was indeed a major shareholder in that company, in a clear conflict of interest with the State. 

- Giovanni Petruzzelli, an associate of Senate ex-President Schifani, was President of the Anti-Trust Authority without being able to claim a specific competence, consultant and co-author of Totò Cuffaro, former President of Sicily currently serving a 7 year sentence for aiding the Mafia.  

- Gaetano Quagliariello, distinguished for his multiple moves from Radicals to the UDC, to PDL (as deputy head of the group), to Monti's group and back to the PDL, was the author and proposer of many of the initiatives introduced - and endorsed by Napolitano - to favour Berlusconi and his companies.  

- Salvatore Rossi, a Bank of Italy high official close to the centre-left.

- Last but not least, Luciano Violante (PD), a sycophant  ex-magistrate who in 1998 had proposed an amnesty for Berlusconi and in 2003 (immortalised by youtube on the web, http://www.youtube.com/watch?NR=1&v=RHPRel7mpUM&amp) actually reminded an ungrateful Berlusconi in Parliament that the PD had guaranteed in 1994 not to interfere with his TV channels, and had set aside the pursuit of legislation on conflict of interest; he actually boasted that Mediaset turnover had increased 25-fold under their government.

In conclusion, not a bunch of Wise Men but - with a couple of exceptions - a gallery of partisan and biassed villains, at least in the eyes of many respectable observers.

When, after over 50 days of total inaction, parlamentarians and regional electors began the process of electing a new President, Pierluigi Bersani - no doubt under the influence of Napolitano - made a spectacular U-Turn from his "No alliance with Berlusconi in government" that had been the main line of his electoral campaign and his early exploration of forming a government, to opening to the Grand Coalition with Berlusconi through the proposal of a candidate agreeable to the PdL, Franco Marini, a respected Catholic trade unionist and former President of the Senate. Such an abrupt switch, to a diametrically opposite policy, predictably was not acceptable to a sufficient number of PD electors to miss the two third majority (required in the first three ballots) so that the candidate was sunk even with the support of most of the PdL.

At this point Bersani made a third spectacular U-Turn and proposed Romano Prodi, corresponding to what Berlusconi called a "declaration of war".  Bersani behaved as a kingmaker, rather than as a democratic leader, in proposing both Marini and Prodi, for neither was subjected to a vote together with other contestants or on his own; Prodi was approved by a dubious and opaque "acclamation" at a meeting of PD electors, instead of being subjected to a ballot, whether open or secret.  So Prodi, the PD founding father and truly independent candidate, also failed to be elected even by the simple majority required at that stage, missing as many as 101 votes that could have been commanded by the PD. 

All the time the M5S had put forward the candidature of Stefano Rodotà, a distinguished professor of Civil Law, who had served for two legislatures as an MP elected as an independent in the Communist Party, former president of PDS - an earlier incarnation of the PD - an ex-President of the Privacy Authority and a civil rights champion: an offer Bersani could not refuse, but did refuse to his eternal shame. Just like the M5S refused to vote for Prodi, also to Beppe Grillo's eternal shame.

This is when Napolitano was asked - again, after repeated earlier refusals  - to stand for re-election. On Bersani's part this was a third U-Turn, from Prodi's independent candidature to Napolitano's strong advocacy of the stitch-up between PD and PdL - or inciucio, in Neapolitan dialect. This is a derogatory term that Napolitano now asks to be banned in his version of political correctness and newspeak; equally banned are expressions playing down the importance of the new government as a "the President's government" or "limited purpose" or "low intensity", or "service government". The designation of the new Premier,  Enrico Letta, until the previous week Bersani's deputy and equally opposed to a Grand Coalition with PdL, made Berlusconi blissfully happy, laughing all the way to the bank (and to the Tribunal), not least because Enrico Letta is the nephew of Gianni Letta, a major advisor and a Minister of his (which makes the present "governo di servizio" a "governo di servi, zio..." in a cartoon in Il Fatto Quotidiano).

The government sworn in on 27 April could have been worse. Angelino Alfano as a deputy Premier and Minister of the Interior was a big price to pay, but at least the old party caryatids on both sides (including Berlusconi) were out - for the time being.  Ministerial average age of 54 years is 11 years lower than in Monti's government; there are only 21 Ministers of which one third are women, including the first black Minister ever in Italian government. Their vote of confidence - aided by a shooting incident in front of the government palace, Palazzo Chigi, immediately used unjustly to demonize M5S - was taken for granted, but its durability is not: the proof of the new pudding will be in the governing.

A Grand Coalition is being presented as a novelty but is nothing more nor less than the replication of the Monti government, with some involvement of politicians that Monti had sought and failed to obtain. It is hard to imagine that Letta might do much more than Monti, apart for the partial reversal of some of his austerity measures: already the two sides are quarrelling about the suspension versus the reimbursement of IMU, and it is not at all clear what government expenditures will have to be cut to make room for lower taxes. 

The centre left PD-SEL alliance is definitively broken; the PD itself has been cracked by Bersani's repeated U-Turns and the final betrayal of PD electoral commitments. Bersani has been scrapped at last; Matteo Renzi has been side-lined and - having always supported an alliance with Berlusconi - will not be able to re-unite the party. The millions who voted for the PD on the basis of its commitment not to ally with the PdL have been betrayed, yet paradoxically those MPs who would not give their confidence vote to Enrico Letta are the ones who have been threatened with expulsion, instead of the other way round. In the end, only one out of 293 PD members of parliament abstained: a "Bulgarian-style" party discipline that would have deserved a better cause. 

Neither Napolitano nor Letta, but Berlusconi is the only true and absolute winner of Italy's latest elections.  All he needs now is to be appointed as life senator by a benevolent Napolitano, and to walk into the posts of either Premier or President at the next round, especially if a French-style direct election of the President was introduced beforehand. Gaetano Quagliariello's appointment as Minister for Institutional Reform, and Berlusconi's bid to a candidature as President of the Committee for Reforms, if successful, might pave the way to such a formalisation of the extra-constitutional presidentialism ushered by Napolitano.  Nothing much can be done about everything else, as a fait accompli, but at least this final corruption of the Italian Constitution can and should be resisted, in order not to have Berlusconi for ever.

More on Hungarian Populism

My friend the Hungarian economist Yudit Kiss (Geneva) contributes this comment:

Dear Mario,

You are very right about the parallels between Berlusconi and Orban – Viktor Orban is clearly inspired by Berlusconi but there are several points where he goes much further then any of the populist leaders today.

Since last April the Fidesz-MPP Party, that won a 2/3 majority of the Parliamentary seats in Hungary, started to dismantle systematically the democratic institutional system that was built during the last 20 years. The process started with the drastic curtailment of the powers of the Constitutional Court, then those of the Budget Council, the rights of the media, an attack on the independence of the National Bank, the introduction of a whole series of new laws and regulations, crowned with the hasty introduction of a new Constitution, all written to suit the values and interests of the governing party.

The new Constitution will be followed by the introduction of 39 "fundamental laws" (that need the approval of 2/3 of MPs) that regulate such basic dimensions of life as labour, voting rights, the pension system, party financing or the regional administrative system. These laws will be created within a year, probably by the same method as the Constitution and the other new laws that have been accepted by the completely docile Parliament since last April, i.e. with the exclusion of independent experts, social partners and the political opposition.

According to Fidesz, last April a Revolution took place at the ballot box and this gives them the right to change radically key dimensions of public and private life in Hungary – from the tax system to social welfare, from street names to education, from film-making to the right to vote. Since the new Constitution declared that Hungary is a Christian country and life is sacred since the moment of conception, the prohibition of abortion and the introduction of compulsory religious education might be just a question of time. Another measure with long-term consequences is the increased tenure of key public functions, so that even if it lost the next elections, Fidesz' interests would be represented at the highest levels under future governments. The new Constitution limits further the independence of judges (and abruptly lowers their retirement age, so that a large-scale renewal of the profession's staff and its leaders) making it even more difficult for everyday citizens to fight for their rights. The President of the Supreme Court was not consulted or informed about this measure previously; neither were the Director of the 1956 Institute or the Rector of the Corvinus University, who learnt about the end (the planned dissolution, in the case of the latter) of their institutions from the media.

With the signing of the Constitution by the President, who faithfully follows the governing party's directions, Hungary ceased to be a Republic and became “the country of the Hungarians". Fidesz claims to act on behalf of the "nation" and the nation includes Hungarians living abroad. One of Fidesz's first steps was that of offering citizenship to ethnic Hungarians living outside the country, promising them voting rights for the next elections. If the EU cannot prevent this, Fidesz will indeed reign for 20 years (as its leaders promised before the elections) and a very dangerous precedent would be created inside the Union.

According to the canon of the populist-nationalist rhetoric, Ministries and several public institutions became "National" and the government is in permanent fight against external and internal enemies. In the Prime minister's speeches Hungary is portrayed as an exceptional country that is not acknowledged by the world at its true value. The country's external enemies are international capital, the IMF and the World Bank, and according to Orban's speech pronounced at the 15th of March national holiday, Brussels that intends to "dictate Hungarians what to do from outside" but is doomed to fail. Internal enemies are the representatives of the previous governments, many of whom are subject to criminal charges, including former PM Ferenc Gyurcsany, or those who occupied leading positions under the previous government. (Corruption is undoubtedly a very grave and generalized problem of Hungarian society and there were some very corrupt Socialist politicians active during the last two cycles - together with corrupt politicians from other parties, including Fidesz – but the criminalization of the whole previous political leadership is more a political manoeuvre then an exercise in transparency.) The critics of the system, particularly if they raise their voice publicly abroad, are also labelled "enemies of the country", as shown by the current witch-hunt against the best of Hungarian philosophers.

Fidesz is on its way to build a genuine party-state – changing the management of state and public institutions and extending its control over spheres that enjoyed a considerable autonomy before, like regional or local governments or independent institutions, partially financed by the state. According to a decision taken in December, 35 prestigious independent public foundations, including the world-famous Institute Peto for handicapped children, several foundations defending minority rights or the 1956 Research Institute, have been dismantled. The directors of public media, theatres, academic institutions, schools, many public companies and institutions have been changed, when the institution itself is not closed down. Those who occupied leading positions under the former governments, including school headmasters, hospital directors or elected leaders of independent organizations have to reapply for their jobs and many of them are replaced. Party affiliation often overrules professional competence and, if arbitrary decisions are not accepted meekly, sometimes a whole professional team pays for it. In a recent, utterly Ubuesque episode the President of an intergovernmental committee in charge of deciding about geographical names was sacked, because he disagreed with the government's proposed new name for Budapest Airport that left out "Ferihegy", the traditional name that was used for decades. 20 out of 21 members of the professional committee had the same view, but the government's proposal went through and later the whole committee was dissolved.

In his first speech after the elections last year Mr Orban promised to put in order the economy, strengthen public order and then start work on a new Constitution. The economy was "put in order" in a way Janos Kornai describes in the NÉPSZABADSÁG article you quoted in a comment to your post on Populism. Many of the country's best economists criticise sharply the government's economic policy, including experts with such diverse backgrounds as Laszlo Csaba, Tamas Bauer, Gabor Oblath, Andras Inotai or Tamas Mellar. Public order was "restored" by a revision of the penal code and the introduction of severe punishments even for minor offences, like speeding, or smoking in certain public places, like bus stops. There are plans to lower the age of legal responsibility to 14.

Beyond the populist rhetoric, however, actual measures do not serve the interests of ordinary people. The new tax system favours the better-off sections of the population, welfare services are being and will be radically cut back, prices of public services are raised, while the new Constitution curtails seriously labour rights.

One of the first conflicts between the government and the Constitutional court broke out due to a new regulation that makes it possible to dismiss public employees without justification. In his pre-election speeches Orban promised 1 million new jobs in 10 years. According to the latest report of the Hungarian Statistical Office, in one year 13,000 new jobs were created, but at least 50,000 jobs were lost. Unemployment stagnated at 11.6%, but was 26.8% among first job seekers (between age 15-24) and reached 10.8% in the age group of 25-54. Average unemployment lasts 18 month, an increase of 1.8 month. The new regulations are also very harsh on the poor, jobless, homeless, marginalised, handicapped, including those on invalidity pensions. Some of these measures are utterly grotesque, but given the general context, one does not feel like laughing; homeless people can be fined for "using public spaces for living" and in some districts of Budapest those who are caught scavenging in the garbage bins also have to pay fines.

The new power's way of dealing with dissent is also very disturbing. After the first months' startled silence, public protests started with a small group of University students who took to the the streets in December with a slogan: "We are the first generation born in a state of law, we don’t want to be the last one." Demonstrations and meetings have multiplied since, including an approximately 30,000 strong gathering in defence of press freedom on the 15th of March national holiday, organized by a small team of civil society activists and a joint, Hungarian and international trade union protest that gathered about 50,000 participants in April. The government usually ignores these massive expressions of dissent, clearly stating that it does not consider necessary to follow a dialogue with its political adversaries, potential social partners or its people. If there is a dialogue it takes the form of choosing one privileged interlocutor – e.g. one particular trade union or one Roma organization – as the only legitimate representative of a certain constituency, with which the government carries out exclusive discussions. Another form is a practically ex-post and formal "popular consultation" that was used in the case of the Constitution; approximately 2 weeks before the final text was presented to Parliament, every citizen received a personal letter with 12 questions about the future text that did not touch any of the crucial points of the document. According to government sources approximately 920,000 persons responded, so the Constitution could be said to have been publicly and democratically discussed and accepted by the people.

In other cases, however, the government's reaction to criticism is harsher. Following recent demonstrations of public order organisations, including firemen, who protested against new measures that take away some of their social gains and worsen their working conditions, the changing rooms were searched and prosecutions were started against several participants, because they marched in their uniform that is not permitted by the current regulations. For this week-end's planned demonstration the firemen plan to borrow uniforms from their Austrian colleagues and hopefully no one will be persecuted. International solidarity helps…

In another, very telling case, the independent mayor of Esztergom, a city some 45 kms away from Budapest, revolted against the Fidesz majority city council that has been obstructing her work ever since her election in the municipal elections in last October. Following the mismanagement of the previous Fidesz leadership, the town is on the verge of bankruptcy and the new mayor wanted to put things into order. Backed by the inhabitants of the town, she asked for help from the government, but had no reply. Finally, she decided to walk to the Parliament, accompanied by a delegation from the city's civil society representatives and sympathizers all along the road. She was not received by any government representative and could only hand over her protest letter addressed to Viktor Orban to a MP at the gate of Parliament. In her absence the city council met, headed by a senior official and passed some new measures without consulting her.

The case of Hungary also demonstrates one of the most serious dangers of the recent breakthrough of the extreme-right; the adaptation of their language, arguments and objectives by mainstream political currents. The Hungarian extreme-right party Jobbik entered Parliament at the last elections. Jobbik is not a coalition partner and Fidesz and Jobbik often display their differences publicly; however, Jobbik's language has entered the public discourse, its arguments are taken up by mainstream politicians and it has been implementing its policy with increasing self-assurance and tacit support. One of the leit-motifs of Jobbik's political agenda is the "fight against Gypsie criminality" and this Spring they started to put into practice their agenda. Since early March Jobbik activists and uniformed members of the "Civil Guard Association for a Nicer Future" (successor of an outlawed, openly racist paramilitary organization, the Hungarian Guard) marched up and down in the village of Gyongyospata, "maintaining order", terrorizing, humiliating and harassing the entire Gypsy population, as a retaliation after a Roma youth was caught stealing wood in the nearby forest. The police stood by, having the order only to intervene if atrocities were committed on either side. Violence broke out in late April, after a stormy Easter weekend that most Roma families spent separately; women and children were evacuated to a youth camp near Budapest, because "Nicer Future" had scheduled a "training weekend" next to the Gypsy settlement. This led to a country-wide scandal (government officials stating that the Roma just left for a holiday and accusing the opposition of wipping up a scandal to discredit the country), and, finally the arrest of some of the leaders of the paramilitary organisation. When they were released a couple of days later and "shared their joy" with the embattled Gypsy community, a massive fight broke out (fortunately nobody was killed) and the government hastily took a measure to forbid "uniformed violence".

I could go on and on. There are some good sites that cover developments in English, see e.g. http://esbalogh.typepad.com/hungarianspectrum/,
http://hungarianwatch.wordpress.com/. A site summarising events in Gyongyospata http://gyongyospatasolidarity.wordpress.com/ .

You are also right about proposals for solutions. Unfortunately we live in a time of crisis, and the solutions that are being used to tackle this crisis are actually making it worse. People all over the world express their frustration with politics and the present state of affairs, but are not able to offer genuine solutions. New economic and social models are urgently needed!

The Spectre of Populism

The spectre haunting Europe in the spring of 2011 is Populism. The search for political support, from votes in democratic elections to acceptance of policies between elections, through appealing to the self-interest of large and vocal groups by unscrupulous, even immoral means, has become a mainspring of political activity. Such means consist mostly of promises that are either: 1) impossible to deliver, or 2) temporarily feasible but non-sustainable on the proposed scale in the longer run, or 3) feasible and sustainable only at the very heavy cost of compromising an overriding public interest, including the rule of law. An example of the first is a manifesto commitment to stopping immigration altogether (by border controls or building walls), or making it illegal and repatriating immigrants; the second, an overambitious programme of large-scale public works, or a commitment to overgenerous welfare provisions and inter-regional transfers; the third encompasses criminality in government activities such as condoning and encouraging illegal buildings or tax evasion. It follows that, of necessity, a populist leader must be an inveterate and shameless liar, sometimes a rigid ideologue, often a criminal.

Paradoxically it is the nature of liberal democracy that generates populist politicians. The requirement to submit to the vote at regular, relatively short intervals makes for the need to try and fool all of the people at least some of the democratically critical time; or fool a majority of supporters for some of the time, until it becomes absolutely obvious to that majority that you cannot deliver at all, or can only do it for a short time, or that the costs of keeping promises are immense and make everybody worse-off. And when the opposition to populism is divided or gormless, populism can thrive even without commanding a majority.

In a representative democracy the purchase of the people’s representatives directly, and very cheaply with respect to the value of what you can obtain in exchange, including immunity from prosecution and blanket impunity, can be even cheaper than taking over a derelict but branded party or founding your own afresh (though this can also be a very profitable business). And once you have built temporary power, you do not even have to buy the people’s representatives out of your own pocket, for you can reward them at public expense. These long-standing techniques are greatly facilitated by the modern possibilities of building up monopolistic or quasi-monopolistic control of the media, in the absence of legislation against the conflicts of interest that are bound to arise.

United States pork barrel politics currently displays its populist public face in the Tea Party but while the Obama government is in power populism is held under some restraint. In Europe we already have the real thing. Clearly Italy with its inordinately disreputable and discredited Premier on trial for a remarkably broad array of criminal activities, backed by his populist ally and accomplice the Northern League, ideologically committed to undeliverable economic, fiscal and cultural policies (yet making fast progress beyond its current 8.3% of the seats), is what I had in mind in characterizing populism. But European populism, or populist-like policies, is widespread and gaining support elsewhere. The map reproduced below is from SPIEGEL ONLINE, 15 April 2011 (just before the Finnish elections, therefore putting True Finns at only 4% of the seats. Spiegel – quite rightly in the circumstances – uses indifferently “right wing”, “right wing populist” and “populist” tout court.)

In Finland, on 17 April half a million voters (19%) endorsed the racist, xenophobic and eurosceptic, anti-abortion “True Finns” party, catapulting it into third position, neck and neck with the first two parties. Its leader Timo Soini holds the balance of power in the formation of a new government. There may be dangerous repercussions on the measures to rescue the Euro agreed by the European Council on 24-25 March, including the additional billions for the euro bailout fund, the planned reform of the fund, and the rescue package for Portugal which is still to be finalized. True Finns are opposed to assisting "wasteful countries" (like Greece, Ireland and Portugal). "We were too soft on Europe," says Soini; Finland should not be made to "pay for the mistakes of others."

Recently right-wing populist parties have impacted government formation in Belgium, the Netherlands and, more recently, in Sweden. The SD (Sweridge Democraterna) cleared the minimum 4% threshold to enter the Riksdag where it obtained 5.7% of the seats, enough to deprive the incumbent center-right coalition of an absolute majority. Last year the anti-Islam anti-EU Dutch Freedom Party gained third position with 15.5% of the seats, making Premier Mark Rutte dependent on the goodwill of its populist leader Geert Wilders. In Belgium the Flemish Interest/Vlaams Belang obtained 7.8% of the seats. In Norway the so-called Progress Party holds 22.9% of the seats. In Denmark the anti-immigration, anti-Islamic Danish People's Party, that supported a center-right minority government for almost ten years, is now the third party in Parliament with 13.9% of the seats. In Switzerland the right-wing People’s Party (PV) is the largest group in the Federal Assembly with 31% of the seats. In Austria the Freedom Party (FPO), founded by Jorg Haider, and the Alliance for the Future of Austria hold 17.5% and 9.2% of the seats respectively. In Romania in the European elections of 2009 the Great Romania Party obtained 8.7% of the votes. Populist representation in Parliament is also present in Latvia (Fatherland and Freedom LNNK 5%), Lithuania (Order and Justice IT 12.7%), Slovakia (Slovak National Party, 5.4%), Bulgaria (Ataka 10.1%), Greece (Popular Orthodox Rally LAOS 5.6%). In France, the Front National of Marine Le Pen is not represented in Parliament but gained 15% of the vote in the first round of administrative elections, and 12% in the second round; the latest opinion polls give her the top position in the first round of the forthcoming presidential elections. The only other country in continental Europe without populist representation in Parliament is Germany.

These are depressing results for any progressive of left or right but insofar as they are expressions of voter-support for divergent, non-progressive policies, are still within the aegis of representative democracy; unlike what is happening in Italy, where the state itself is under assault from criminal and sectional interests, and is classically undefended by a fragmented and incompetent opposition.

It is Hungary, however, that can be defined as a laboratory for the new, national, populist Europe, with mounting aspirations to ethnic identity and zero tolerance of social diversity, with the Hungarian national-conservative Fidesz party rising to power last year behind populist calls for law, order and more police. (Soon after he was sworn in, Prime Minister Viktor Orbán promised a "noticeable increase in public security within two weeks.") Furthermore, “The ruling Fidesz party of Hungarian Prime Minister Viktor Orbán used its two-thirds majority to whip a new constitution through parliament on Monday [18 April 2011], and critics across Europe are in uproar. The move, they fear, will convert the party's conservative, nationalist ideology into a state doctrine, cement its power well beyond the end of its term and upset the democratic system of checks and balances” (SPIEGEL ONLINE, 19 April). The new Constitution reduces the powers of the constitutional court and broadens government powers over the magistrature, over budgetary and fiscal matters and over the media – extending it, through government nominees, beyond the current government tenure that is expected to end in 2014. The new authority controlling the media since the beginning of the year, Nmhh, already exercises censorship with orwellian efficiency. This is the very essence of Berlusconi’s project.

On the night the new Hungarian constitution was approved the German public TV network ARD commented: “The constitutional state has largely been abolished, future elections are effectively meaningless, the media are being whipped into line, as are theaters and museums and everything else that could shape the nation's culture." … "Barely a trace remains of pluralism, of variety, of the basic features of a free society. If you talk to people in Hungary about politics these days, you're confronted with fear, like in the days of East Germany. In this state, Hungary no longer belongs in the EU. It is a disgrace for Europe. But Europe is saying nothing."

The Süddeutsche Zeitung commented: "The constitution enshrines a spirit of ideological, ethnic intolerance, both externally and domestically. Some are being reminded of the fascist rhetoric in Europe between the world wars. Neighboring countries are getting unpleasant memories of the cultural arrogance and power of the Hungary of old, whose Magyarization programs they were subjected to. The new constitution claims that the state of Hungary represents all other Magyars, meaning the three million living in neighboring countries." (the quotes from both sources are taken from SPIEGEL ONLINE, 19 April).

In the 2010 Hungarian elections the extreme right party Jobbik also entered Parliament with 16.7% of the vote. In 2009 the Jobbik-backed para-military Hungarian Guard was banned, but new private militias have been re-created and have been harassing Roma villages over Easter, forcing the Roma population to evacuate, and have been involved in beatings and clashes (SPIEGEL ONLINE, 28 April; see also their Photo Gallery). “The police and the judiciary have lost control over the growing right-extremist citizen groups and paramilitary-style gangs. In recent months, extremists have repeatedly staged marches, primarily in eastern Hungary, against "Gypsy criminality." And police in the villages which have been targeted have shown a preference for standing aside.” The Hungarian state appears to have retreated from certain regions and left them to the right-wing vigilantes. So much for the promise of a noticeable increase in public security.

In Hungary the populist Executive has succeeded in identifying itself and its values with the state and has permanently altered what was a representative democracy, and by which it came to power, so that its populist policies cannot be removed by democratic vote. It is here, in the embodiment of populist values in place of democratic values within the modern state, rather than as policies on offer to the electorate in party manifestos, that the threat to the entire post-war social democratic settlement lies.

Voters are faced with: the global economic crisis, and the associated mass unemployment; enhanced international competition and protectionist temptations; rampant inequalities and the challenge of migrations, concentrated in a few areas and sectors; the euro crisis and the prospect of all having to share the cost of bailing out countries perceived as non-deserving; the exploitation and resulting demise of the welfare state. In short, they have strong objections both to re-distribution and to lack of re-distribution of income and wealth, i.e. ultimately to the re-distribution processes such as they are. In these conditions, voters will abandon nebulously felt democratic powers in return for equally nebulously-offered protection of their living standards and their way of life.

There is, too, a knock-on effect in other EU countries, including those up to now relatively unaffected by populism (whether as a result of their voting system or the maturity of their democratic values) but vulnerable to the wave of North African refugees connected with participation in the Libya mission, causing bickering and conflict, and leading to a waning of solidarity among these countries in their determination to rid Europe of a rogue state on its Mediterranean borders.

What can we do? Re-value political participation and activism. Never accept that "politics is dirty" or that "all politicians are corrupt", this is false. Fight indifference in all its forms. Forge political alliances by looking for common ground rather than indulging in unaffordable splits and unacceptable assaults upon people’s aspirations and self-sufficiency. Avoid dogmatism. Defend the democratic state and the rule of law. Speak up; those with access to media or academic outlets should use it to argue for representative democracy and refute the frightened selfishness of populist policies. And be counted. Never fail to vote whenever you have the opportunity.