Grandiose Coalitions

Can grand coalitions of Left and Right solve Europe’s problems? Many wish they could as, in the wake of the German elections, Angela Merkel may be forced to embark on a grand coalition government with the Social Democrats. The argument runs thus: the problems we face are too serious to be left to partisan politics. Only a joint effort, in which both sides renounce their more extreme views — at least temporarily — allows for quiet problem-solving, instead of rabid electoral campaigning.

The argument is disputable in theory and disproved in practice. It is, specifically, refuted by Italy — where Enrico Letta is now prime minister of a grand coalition government, after the one led by Mario Monti. The Italian grand coalition is proving a necessary evil to guarantee political stability, which is no small achievement — but it is certainly not an engine for reform.

Both Letta and Monti were supported by the Left, the centre and the Right. Monti became prime minister after endless scandals trashed the leftovers of Silvio Berlusconi’s credibility, while Letta took the helm after an election in which no clear winner emerged. But the  theory behind the two administrations is the same. 

Monti had one important success: he reformed the pension system, adjusting retirement age to life expectancy. He also attempted — but failed — to reform other institutions and to further liberalise the economy.

Letta has not yet attempted anything as bold as Monti’s proposals. His cabinet has enacted micro-measures that balance tax breaks for some business sectors with tax increases on others. 

As usual, tax cuts Italian-style are financed by tax increases: the €4 billion shortfall caused by the abolition this year of a controversial property tax will be offset by other fiscal measures. Diego Menegon of the Istituto Bruno Leoni reckons that under the Letta government the overall fiscal burden on taxpayers will decrease by €2.9 billion in 2013, but go up again by €870 million in 2014 and by the same amount in 2015.

Monti and Letta have guaranteed political stability at a time when chaos was the alternative. In September, the government resisted Berlusconi’s attempt to overthrow it. The coalition proved resilient.

Involving everybody in the government makes everybody a potential culprit for its fall: this has proved to be a good strategy. Yet the sad truth is that grand coalitions do not ease out those with the power of veto: they reinforce them. Political parties know that a grand coalition is not for ever, so they manoeuvre to appease their constituencies with an eye on the next election.

Reforms can have long-term benefits for the whole of society, but they generate short-term losers. Short-term losers are angry voters. Building a popular consensus for reform is a difficult business; helping those with veto powers to collude doesn’t make it any easier.

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