Suffocating bureaucracy, mountainous debt and political instability keep Italy stuck in the past, with little hope for innovative reforms.

Former Italian Prime Minister Silvio Berlusconi in front of a photo of another former premier, Matteo Renzi, Rome, 21 June 2017. (EPA/Angelo Carconi)

Italy invented banking in the Middle Ages. That is hard to believe now if you try to do anything much more complicated than withdrawing money from an ATM machine. Like so much of Italian life, banking is tied up with frustrating amounts of red tape.

The medieval English kings who borrowed from Tuscany’s powerful banking families to finance their wars might still be filling in paperwork if they tried it nowadays.

I just spent a month trying to get a check book from my new bank before giving up for the sake of my mental health. Too many irrational rules applied by elegantly garbed but unhelpful bank employees.

I won’t bore you with the Byzantine details, but perhaps it is no surprise that Italy has a dangerously fragile banking system with 350 billion euros of bad debts. It will cost taxpayers up to 17 billion euros to wind up two failed regional banks under a deal announced last month.

Banks are only one aspect of the bureaucracy that suffocates much of life in modern Italy, discouraging investment and impeding efforts to lift it out of a decade of the slowest growth in the euro zone that has saddled it with the region’s largest debt after Greece.

Rubble, tape and beautiful old churches

The area where we live in eastern Italy was badly damaged in two earthquakes last year that killed nearly 300 people. But hardly any reconstruction work has started, and thousands of people still live in temporary accommodation, the process delayed by labyrinthine rebuilding regulations.

The area is littered with rubble, red and white tape around unsafe houses and beautiful old churches held up by wooden struts.

But prospects of reforms to cut away bureaucracy, liberalize the economy and tackle endemic corruption as well as end political instability appear to be receding after a brief period of hope that change was at last possible.

Center-left leader Matteo Renzi, 42, who held out hope of broad reforms and a break with the past when he swept to power as a dynamic young prime minister in 2014, has been seriously weakened by crushing defeat in an ill-advised constitutional referendum last December that forced him to resign as premier.

Major losses for his ruling party in recent local elections have made him more vulnerable, and the center-left is riven by divisions.

Showman Berlusconi makes a comeback.

The most startling symbol of how things have rewound since Renzi’s brief period of dominance is the return to the fray of 80-year-old showman Silvio Berlusconi, seemingly recovered from both life-threatening heart problems and a period in the political darkness.

Berlusconi has mellowed and is more likely to be seen playing with his poodle Dudu’ than surrounded by scantily clad starlets as in his scandalous heyday as the host of “bunga bunga” orgies.

But he still has a girlfriend 50 years younger, the trademark double-breasted blue suits and a dark hair weave. Counted out many times before, the four-time premier seems rejuvenated.

Berlusconi’s Forza Italia party still has only about half the support of Renzi’s Democratic Party or the populist Five Star Movement (M5S), which are running almost neck-and-neck in opinion polls. But recent developments have created a possible opening for the billionaire media magnate.

After the collapse of Renzi’s attempts to change electoral rules and make governments more durable, Italy looks likely to vote in a poll due by next May with a proportional system like the unstable years before 1993.

Back to the future

Such a system would cause fragmentation, and Berlusconi is in a better position, as the unchallenged leader of his center-right party, to make post-election coalition alliances than Renzi.

Berlusconi also sees an opportunity to win back disillusioned voters who have fled to the populist M5S, led by rabble-rousing former comic Beppe Grillo. If the center-right alliance can stand united as it did in the local elections, he says, it might even beat the big parties.

Berlusconi is banned from public office because of a tax fraud conviction, but even if his appeal to the European Court of Human Rights fails, he believes he could be kingmaker if not premier.

So it looks like back to the future rather than hope for Italy’s long-suffering people.

In a thundering editorial in the Corriere della Sera newspaper, commentator Ernesto Galli della Loggia denounced  “midget” politicians and said the country felt without hope: “It is the desperate anxiety of those who cannot see anywhere in politics an understanding of the gravity of Italy’s decline.”

Barry Moody worked for 12 years in Italy in various assignments during a long career as one of Reuters most experienced foreign correspondents and editors. Most recently he ran editorial operations in Italy, Spain, Greece and Portugal at the height of the euro zone debt crisis. He was also Africa Editor for 10 years and Middle East editor for seven, during which he led coverage of the 2003 Iraq war. His other postings included Asia, Australasia and the United States.


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WorldEuropeLetter from Italy: A country strangled by red tape