Europe Bets Billions Can COVID-19 Lead to a Sea Change in Italy?

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Will Italy manage to reboot the country’s economy through sorely needed government and economic reforms or will COVID-19 drive it into a long-term recession? A summer journey across a country that is laden with fear but still filled with hope.

By Frank Hornig

At 5 p.m. on April 19, Francesco Italia’s phone rang. “This is not a joke, this is Pope Francis speaking,” the voice at the other end of the line said. “How are you doing?”

Now, about three months later, Mayor Italia is sitting in his office in the Siracusa City Hall talking about the phone call he will never forget.

In ancient times, the city, which is more than two and a half thousand years old, served as one of the most important Greek colonies and was a center of Hellenistic culture. Plato, Archimedes and Aeschylus all lived here at various times. But today? And why would the pope be interested in him of all people?

“I think he wanted to send a signal to all the country’s mayors,” says Italia. In typical Francis style, he didn’t call the powerful leaders of Milan or Rome, but Italia, the mayor of a city of 120,000 in the socio-economically disadvantaged southern part of the country. “He was trying to say: I’m thinking of you, I am with you, I pray for you,” Italia says.

On this July afternoon, it’s unbearably hot outside on the almost deserted Piazza Duomo, but it is cooler in Italia’s office, with its deep green, richly decorated wallpaper. The grand office doesn’t really fit with his curly hair, three-day beard and his fast-moving glance.

He once got tired of the unhurried life in Siracusa, and left to run a television station in Milan, but when a sudden tourism boom began rapidly transforming the city, he returned and got into local politics.

The Worst Is Over But the Shock Remains

The 47-year-old ought to finally be able to relax a bit – summer is here and the worst part of the COVID-19 crisis seems to be over. But he still hasn’t completely recovered from the shock of recent events. “It was and is incredibly difficult. It was a huge stress test.”

Italia speaks freely as he recalls how Prime Minister Giuseppe Conte imposed curfews in nightly press conferences. The corresponding decrees had been written in bureaucratic Italian and were barely comprehensible. Local residents, who were deeply unsettled, flocked to their mayor with questions.

At times, there was no room in the hospital for a grandmother with a fever. Then false local reports about a supermarket that had allegedly been contaminated with COVID-19 began making the rounds.

Italia responded the best he could, but at some point, he became fatigued by the endless cries for help. “When you can’t solve problems, your frustration mounts.” The pope’s call came at just the right time.

And what now? “The fear is still great, that’s the problem,” he says.

When the mayor steps in front of the City Hall in normal times, he’s usually surrounded by groups of tourists, but now the place is deserted. “Many businesses have already given up,” he says.

It’s a coincidence that the mayor has the same name as his country, but Francesco Italia and Italy are currently facing quite similar problems. First, the pandemic, now fears of an unprecedented economic crash.

The European Union has at least launched a historic aid program for its member states. The expectations are enormous, and the billions of euros from Brussels will be linked to tough reforms, which isn’t exactly Rome’s political strength.

Italy is facing some far-reaching decisions. Will it take advantage of the crisis to implement real change and create unprecedented economic growth? Or will it squander the billions as it so often has, and allow the country’s gradual decline to continue?

It’s setting the scene for an unprecedented summer in the country. Everything is quieter, more restrained and more unsettling.

Although it may sound like a paradox, the atmosphere is also more relaxed. With few guests from abroad, you can enjoy an aperitivo at Venice’s Rialto Bridge in peace. And the Sistine Chapel in Rome is no longer as packed as a Black Friday sale.

It’s almost too good to be true.

“Corona is like an explosion whose blast wave hasn’t even arrived yet,” says Gabriel Zuchtriegel, the German director of the archeological park at Paestum. “The economic crisis is far from predictable,” he says.

He can see it firsthand at the archeological ruins he manages south of Naples. With fewer visitors, fewer people are buying pizzas, which means less mozzarella – a hard blow for many farmers who have already had to pour milk down the drains. Similar effects can be seen all across the country.

Record Economic Decline

The European Commission recently prepared a map of Europe tracking economic prospects. Right now, there’s only one deep red spot on it: Italy. All the other countries are drawn in paler colors.

The EU’s executive branch is anticipating that Italy’s gross domestic product will slump by 11.2 percent this year, a record economic decline by European standards. “Real GDP is not expected to return to its 2019 level by the end of 2021,” the commission wrote.

“If we want things to stay as they are, things will have to change,” is one of the most famous sentences in Italian literature, from the novel “The Leopard” by Giuseppe Tomasi di Lampedusa.

But there wasn’t much will to change in Rome – at least not until the coronavirus struck. Prime Minister Giuseppe Conte’s center-left coalition was divided, and Matteo Salvini, the head of the popular Lega party, was just waiting in the wings to install a right-wing populist government.

The balance of power is shifting in Italy, with a changing equilibrium between the left, right-wing populists and the political center.

For weeks, public opinion polls have been painting a remarkable picture. Salvini’s approval ratings are crashing. The previously battered Conte, on the other hand, has emerged as the most popular prime minister of the past 25 years.

Will that go far enough to deliver a stable majority for reforms? Or will the determination to carry out reforms be worn out by the arduous fight against COVID-19?

The Italians were hit earlier and more brutally by the coronavirus that any other country in Europe. And they brought the pandemic under control with what were likely the toughest measures in Europe.

They will now be forced to reflect closely, rethink their identity and find their role in the 21st century in a way that will be more far reaching than for the country’s other EU partners. If nothing changes, nothing stays the same.

“When All This Is Over, the World Won’t Be the Same”

Francesca Melandri has bought herself a European flag. The blue flag no waves from her terrace above the rooftops of Rome — her appeal for a less selfish, fairer EU. “There’s no alternative,” says the writer, “otherwise Europe will disintegrate, economically, socially and geopolitically.”

Before the interview in her apartment begins, she prepares an espresso and talks about her children, both of whom live in Germany, about her past family life in South Tyrol, where sentences often began in Italian, then switched to German and ended in dialect.

On March 27, when her country was the global center of the pandemic, she published a letter in DER SPIEGEL. “I am writing to you from Italy, which means I am writing from your future. You will be at where we are now in a few days,” it reads. “You’ll laugh. You will be afraid. When all of this is over, the world won’t be the same.”

Her letter touched not only Germans. It traveled around the continents, just like the virus, and has already been translated into 32 languages. “I wrote down very simple human emotions,” Melandri says. She says she was overwhelmed by how her feelings were shared around the world

Months later, she is sitting in her apartment in Rome, where she reflects on the consequences of the pandemic. “The lockdown was only the first chapter in a long novel,” says Melandri. “The plot is far from over.”

She also has a backstory to tell. To understand why it was rich and proud Lombardy, of all places, that became Italy’s Wuhan, the disaster area with the most dead, you have to look far back, she says. This is important to Melandri, she says, because it has implications for today’s politics.

Lombardy is the home of the Lega party. It has governed for years in the northern Italian region around Milan and Bergamo and has systematically privatized the regional healthcare system during this time. That system clearly failed during the pandemic.

In the past, the right-wing populists successfully laid the blame on the social democratic PD party for all that ails the country, instigating a culture war they portrayed as being between a leftist establishment and the down-to-earth Lega.  “But this time,” Melandri says, “Lega cannot claim that others are to blame.”

The Two Italys of the Pandemic

In her view, there were two Italys during the pandemic.

The hard-hit north, which is still reporting the highest numbers of infections, albeit at a low level. “There’s a deep trauma there,” Melandri says. “It will take years to work through it – emotionally, socially, politically and legally.” And then there’s the rest of the country, which fought off the coronavirus quite successfully.

It seems like an irony of history. Poorer southern Italy, which has often been the target of ridicule in Milan or Bergamo, actually handled the pandemic better, and will now have to pay economically for the mistakes made by the economically stronger north.

So, what now? What will the next chapter bring? Melandri is cautious with her predictions, but she believes the populists will retain an important role in Italian politics. “The recession is beginning, many Italians are struggling economically and they don’t know what will happen next week or next month,” the author says.

“Populism thrives when the stomachs are empty. Desperation is a breeding ground for ugly things,” says Melandri. That’s why the EU is so crucial now, she argues. “If a Europe based on solidarity is strengthened, the populists have less of a chance.”

At times, it seems hard to recognize Italy these days. Only 12 months ago, Salvini, who was then deputy prime minister and interior minister, was shirtless and influencing politics from the Papeete Beach club. He spent his days insulting immigrants and his evenings making D.J. appearances at the beach party. In the light of the setting sun, dancers in skimpy outfits would gyrate lasciviously to the national anthem (with its sad lyrics: “We were for centuries downtrodden, derided”) as it resounded from the speakers over cheerful beats.

The crowd on the beach loved it. The interior minister as influencer, as D.J. in swim trunks, with a slight belly and a mojito in hand? Fantastico!

Things are a lot quieter these days at the Papeete Beach resort on the Adriatic coast. Salvini has returned to the resort for his vacation, but few are interested. His fans aren’t cheering him on like they did when he visited beaches and town squares last summer.

One might expect Conte to take advantage of his own popularity and Salvini’s relative weakness to lead the country as decisively out of the economic crisis as he did out of the pandemic. But things aren’t that simple.

A Complex Relationship with the EU

Even though the dividing lines have recently taken a surprising turn, politics in Italy remain deeply split.

The support Salvini lost has shifted to Giorgia Meloni, the popular leader of the post-fascist Fratelli d’Italia party. The right-wing remains strong, but is no longer dominant, because the third opposition party, Silvio Berlusconi’s Forza Italia, is entrenched in the center and even maintains cautious contacts with the government.

The complex relationship with the EU is upsetting Italian politics. At the beginning of the pandemic, many people who were already weary of the EU felt abandoned by the partner countries. A majority of Italians even wanted to leave the EU.

However, with billions of euros now to be directed at Italy as part of the EU’s recovery fund, the political climate is changing. Old patterns for conflict no longer correspond to the new situation, with positions in question and alliances getting reassessed in the process.

But it’s unclear whether this will ultimately result in a national consensus for an economic reversal.

A Boom Halted

Alessandro Mattinzoli survived COVID-19, but it was a close call.

He had a cough at the end of February and he went to the hospital to have it checked. The doctors decided to admit him right way. He spent 10 days in a coma and was only allowed to go home after seven weeks. “I wondered more than once whether I would see my children again,” Mattinzoli, who is a member of the Lega-led Lombardy regional government, told DER SPIEGEL at the time.

While he was still in bed at the hospital, Mattinzoli, who is a member of Berlusconi’s Forza Italia party, sent an audio message to friends. It was a rant about Prime Minister Conte sitting behind his desk and not doing enough to help people.

In no time at all, that outburst of anger spread all across the country via WhatsApp. “I was still under the influence of medication,” he said a short time later, apologizing for his choice of words.

A few months later, the 60-year-old is giving a tour of his hometown of Sirmione, where he served as mayor for nine years. He wants to show the extent to which the coronavirus has changed Italy. His voice is still raspy from the long illness.

Sirmione is situated on a peninsula on the southern shore of Lake Garda. Maria Callas used to live here, and today the place is especially popular with German tourists.

Before the coronavirus, there were 22 million overnight stays per year on Lake Garda. The pandemic halted that boom.

And what about the other industries in Lombardy, a region that is a crucial supplier of parts for supply chains in German manufacturing? How many people will lose their jobs? Will the whole country soon be shaken by societal tensions?

Those are the kinds of worries that kept going through Mattinzoli’s head when he was recovering in the hospital.

As he constantly heard the sirens of the ambulances delivering new COVID-19 patients to the emergency room, he also had to think of his Osteria Alla Torre, which is located on a hill overlooking Lake Garda. And of the uncertain future of his family business and the fate of his employees. Sitting at the white tablecloth-covered table in his restaurant now, he raves about the trout in Lake Garda. He says he’s happy to have the business open again, even if there are only a few guests for lunch.

The years leading up to the pandemic were a success story for northern Italy. The region had become one of the richest and most modern in Europe. At most, many entrepreneurs were worried about the weak government, the inefficient bureaucracy and the painfully slow judiciary. But nothing seemed to threaten the boom.

Now, almost overnight, Italy has gone from being a net payer to the EU (meaning it pays more in that it gets back in subsidies) to what will probably be the block’s biggest recipient of aid.

Manufacturing has collapsed and unemployment is expected to reach 12.4 percent by the end of the year, according to the Organization for Economic Cooperation and Development (OECD). It claims that it will “wipe out” all the growth that has been seen on the labor market there over the past four years.

An Existential Challenge

The uncertainty this has created is immense. Take the city of Vittorio Veneto, for example. Sheep graze in a meadow here next to a raging mountain stream and bales of wool are piled up to the roof in the sheds next door.

The Lanificio Bottoli company, probably the oldest wool spinning mill still operating in Italy, is located here on the southern edge of the Alps. All the other spinning mills in the city closed down long ago.

Roberto Bottoli, 73, strings the different colored yarns together himself before they run through the loom. Using textile chalk, the owner marks his corrections on the first meters of suit fabric. This is the way he has done this for more than 50 years.

He’s a quiet man with a mane of gray hair and wears a blazer made with fabric he has woven himself. When he has spare time, Bottoli likes to go to Venice, just an hour away, to photograph the city in the evening light. He still enjoys it after decades of doing it, and the colors inspire him in his designs. “Be it spinning, dyeing or weaving, we’re a one-stop shop,” he says. Fashion designers like Junya Watanabe even travel from Japan to select fabrics.

Even if it hadn’t been easy, work was going well until February. “There are less and less sheep in Italy,” explains Bottoli’s son Ettore. And that also means less virgin wool for the textile mill.

The 33-year-old spent 10 years working for fashion companies in London and New York. When he returned to Vittorio Veneto a while back, everyone told him he was crazy.

“Don’t Knock Us Out”

He now has to solve problems that his friends in Manhattan have probably never heard of, but he still likes it here. “Many shepherds are tired of cleaning out the stables at three o’clock in the morning. They’d rather open up a restaurant.” He says it’s also difficult to find workers. “People want to get into web design, not the loom.”

But those are small worries compared to the fallout from the crisis triggered by the coronavirus. The forced production stop during the lockdown ruined the season, says Roberto Bottoli. On top of that, there are fewer travelers, fewer customers in the luxury boutiques at the airports and in city centers from Milan to New York.

“If the shops aren’t selling much, then they will also order less from us for next year,” Bottoli says. “The whole industry is facing a production shortfall.”

In response to that, he sent a firebrand letter to Prime Minister Conte back in April. Bottoli, who represents the sector of 100,000 employees in the regional employers’ association, wrote that Veneto’s apparel industry is threatened with a “bloodbath.” He noted that companies had managed to survive globalization and unfair competition and that they couldn’t be left to die now because of the shutdown of production. “Don’t knock us out,” he pleaded.

He never got an answer. Nor does he expect much from politicians. “The support consists mainly of words, but little actually happens in practice.”

It’s a Friday afternoon, just before closing time. As he gives a tour of the factory, Ettore Bottoli reaches into the rough new wool, takes fine yarns in his hand and strokes finished suit fabric.

Where does he expect things to go from here? He says his dad just told him, “For next summer, we need bright, vibrant colors – people will want to dare things again.” But what, Ettore wonders, if everyone wanted to wear black instead?

Even though he expects the coming months to very uncertain, he stands confidently each morning at his mill by the rushing brook.

“I’m the fifth generation here,” he says, “I’m not supposed to be the end of the company’s history.”

Will Italy Reform this Time?

Like all other recipients of the EU recovery fund, Italy is expected to present concrete reform plans in Brussels by October. The kinds of vague declarations of intent seen in the past will no longer suffice this time.

Rome has an impressive record of missed opportunities. The old Italian party system collapsed around 30 years ago. But politicians didn’t take advantage of that new beginning to push through political reforms. Instead they got Silvio Berlusconi. Then came the severe recessions that followed the Sept. 11, 2001, terrorist attacks, the collapse of Lehman Brothers and the euro crisis, but the Italians still didn’t take steps to reform the country.

So, what are the chances of it working this time?

In Siracusa, Francesco Italia recalls this long history of procrastinated reforms during a conversation in his City Hall.

It irks the mayor when he thinks of all the failures. His city near Mt. Etna faces dilapidated schools, run-down social housing and a neglected healthcare system.

“When it rains into my public housing flat, when my mother has cancer and dies because I can’t get an appointment for her for 13 months, then I have a pretty clear idea of the state: It isn’t taking care of me and it excludes me,” says Italia.

“There is a tremendous amount of pent-up anger in the country,” he says. “And it is growing precisely because corona is making many people poorer.”

Italia believes there’s only one way to regain people’s trust: The government needs to invest in areas like education, medicine, housing, and it also has to prove that it cares about its people.

“It needs to be done quickly” the mayor says. “We have no more time to lose.”

Der Spiegel

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