Next For Italy: An Unlikely (And Up To Now Unthinkable) Alliance?

A traditional party and a populist movement may join forces to get Italy out of its political crisis and avoid yet another election.

Outgoing PM Giuseppe Conte in Rome
Outgoing PM Giuseppe Conte in Rome
Federico Geremicca

Italy is infamous for its short-lived governments. Over the past two decades only TV tycoon Silvio Berlusconi managed to complete a five-year term as prime minister, with a government reshuffle to break it up (2001-2006).

This week's government crisis ensued from the troubles between the two coalition parties: the anti-establishment Five Star Movement (M5S), led by Luigi Di Maio, and the far-right League, led by Matteo Salvini, who was also acting as Interior Minister. Prime Minister Giuseppe Conte, a previously unknown politician, resigned on Aug. 20.

The crisis followed the League's large electoral win in May's European elections. With 34% of votes, the League became the leading Italian party in the EU parliament and aspired to more votes in Italy itself. It was Salvini who said he no longer supported the coalition and wanted a new government. Salvini was however surprised to find out that an even more unlikely coalition may arise to avoid elections and a major League victory, as M5S started negotiations with the center-left Democratic Party (PD).


ROME — It is too soon to understand how Italy's political crisis is going to end, but after this week's initial talks between Italy's President Sergio Mattarella and the country's political leaders, there are good indications of how things will shape up: the League and the Five Star Movement (M5S) will not get back together and Giuseppe Conte will not be prime minister again — even if the M5S were to forge an alliance with the Democratic Party (PD).

Another thing that became clear during this tense and confused week is that Mattarella has no intention of allowing a repeat of last year's scenario, where the March 2018 vote led to three months of negotiations before a government was formed. Today, that is simply inconceivable, and the days that the president will grant parties to reach an agreement will be few. Moreover, Mattarella seems opposed to giving the go-ahead to a narrow majority, held together only by the unwillingness to trigger new elections.

The only possible solution, therefore, is the anomalous pact between PD and M5S.

Mattarella is also asking parties to start thinking about a possible candidate to preside over a new government — to avoid wasted efforts on choosing a new prime minister.

So it is almost only by inertia that the hypothesis of a M5S-PD government seems to have made another step forward. PD leader Nicola Zingaretti received a full mandate from the party management to negotiate with M5S's Luigi Di Maio, while the M5S said they stood strongly behind their political leader. But let's face it: These initial indications face several difficult agreements until they can turn into a concrete way out of the political crisis.

The fact remains that there are no other clear alternatives at hand — except maybe for an interim government that would bring the country to new elections in the fall. The only possible solution, therefore, is the anomalous pact between PD and M5S.

President Mattarella and Zingaretti in Rome — Photo: Presidenza della Repubblica

One wonders, then, what has changed compared to 2013 and 2014, when the then PD leaders tried — in vain — to convince the M5S to embark on a joint government venture. There was definitely a harsh reality check to which the M5S and their theories of "happy degrowth" were submitted during this government experiment. What matters most is that the M5S has lost a lot of ground among voters.

But it remains paradoxical that Di Maio and Zingaretti are moved by divergent interests: the former fears a vote that could halve the votes they obtained last year, while the latter could emerge from that election with a stronger party and an indisputable popular legitimacy.

There was definitely a harsh reality check.

It is certainly not by chance, then, that Zingaretti included among his pre-conditions a "discontinuity in both people and contents" which, depriving Conte and Di Maio of any role, represents an almost insurmountable obstacle for the M5S. Yet, despite this, no door has been slammed in Zingaretti's face.

So, that's it. The conversations are ongoing to create a new alliance between a "traditional" party and a populist movement. It is somehow reminiscent of what is happening in Madrid these days, between the socialists of Pedro Sanchez and the Podemos party of Pablo Iglesias. With the difference — perhaps not irrelevant — that in Spain, the socialists are stronger than their interlocutors, while here the M5S has almost twice the strength of the PD in parliament.

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Debt Trap: Why South Korean Economics Explains Squid Game

Crunching the numbers of South Korea's personal and household debt offers a glimpse into what drives the win-or-die plot of the Netflix hit produced in the Asian country.

In the Netflix series, losers of the game face death

Yip Wing Sum


SEOUL — The South Korean series Squid Game has become the most viewed series on Netflix, watched by over 111 million viewers and counting. It has also generated a wave of debate online and off about its provocative message about contemporary life.

The plot follows the story of a desperate man in debt, who receives a mysterious invitation to play a game in which the contestants gamble their lives on six childhood games, with the winner awarded a prize of 45.6 billion won ($38 million)... while the losers face death.

It's a plot that many have noted is not quite as surreal as it sounds, a reflection of the reality of Korean society today mired in personal debt.

Seoul housing prices top London and New York

In the polished streets of downtown Seoul, one sees endless cards and coupons advertising loans scattered on the ground. Since the outbreak of the pandemic, as the demand for loans in South Korea has exploded, lax lending policies have led to a rapid increase in personal debt.

According to the South Korean Central Bank's "Monetary Credit Policy Report," household debt reached 105% of GDP in the first quarter of this year, equivalent to approximately $1.5 trillion at the end of March, with a major share tied up in home mortgages.

Average home loans are equivalent to 270% of annual income.

One reason behind the debts is the soaring housing prices. In Seoul, home to nearly half of the country's population, housing prices are now among the highest in the world. The price to income ratio (PIR), which weighs the average price of a home to the average annual household income, is 12.04 in Seoul, compared to 8.4 in San Francisco, 8.2 in London and 5.4 in New York.

According to the Korea Real Estate Commission, 42.1% of all home purchases in January 2021 were by young Koreans in their 20s and 30s. For those in their 30s, the average amount borrowed is equivalent to 270% of their annual income.

Playing the stock market

At the same time, the South Korean stock market is booming. The increased demand to buy stocks has led to an increase in other loans such as credit. The ratio for Korean shareholders conducting credit financing, i.e. borrowing from securities companies to secure stock holdings, had reached 21.4 trillion won ($17.7 billion), further increasing the indebtedness of households.

A 30-year-old Seoul office worker who bought stocks through various forms of borrowing was interviewed by Reuters this year, and said he was "very foolish not to take advantage of the rebound."

In addition to his 100 million won ($84,000) overdraft account, he also took out a 100 million won loan against his house in Seoul, and a 50 million won stock pledge. All of these demands on the stock market have further exacerbated the problem of household debt.

42.1% of all home purchases in January 2021 were by young Koreans in their 20s and 30s

Simon Shin/SOPA Images/ZUMA

Game of survival

In response to the accumulating financial risks, the Bank of Korea has restricted the release of loans and has announced its first interest rate hike in three years at the end of August.

But experts believe that even if banks cut loans or raise interest rates, those who need money will look for other ways to borrow, often turning to more costly institutions and mechanisms.

This all risks leading to what one can call a "debt trap," one loan piling on top of another. That brings us back to the plot of Squid Game, "Either you live or I do." South Korean society has turned into a game of survival.

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