Limes: Where Economics Meets Geopolitics

A Guide to Political Power in Italy

This piece is an abbreviated analysis of a longer paper available in PDF here.

“Who rules Italy?” Knowing the answer to this question is important to providing investors with a sense of how the country really works and allowing any serious reform project a chance to succeed. But understanding the dynamics of Italian politics is a difficult exercise, and even the country’s elites tend to hold hazy views of the power structure. Let’s take a look at each of the major players in Italian politics to see how much leverage they actually possess.

Big Business and the Stock Market:

Beppe Grillo, founder of the opposition Five Star Movement (M5S), has argued that the Milan stock exchange, known as the Piazza Affari, is the center of political power in Italy. However, over the past 10 years, the Piazza Affari’s market capitalization has dropped from ninth in the world to twentieth, while major companies have opted to hold their IPOs elsewhere (Prada chose Hong Kong) and others have delisted (as Benetton Group did last year). While the performance of leading “Made in Italy” brands (Campari, Luxottica and Tod’s, among others) has largely decoupled from the movement of the FTSE MIB index, the country’s stock market reflects the dominance of state-backed firms (Eni, Enel, Finmeccanica) and the buoyancy of the elite.


The M5S has made good use of Italian voters’ belief that every member of parliament (MP) is equally powerful, but in truth, they have very little influence on the legislative process, despite their hefty salaries. While MPs have the ability to issue vetoes and throw sand in the gears, the executive branch dominates the policy-making process by issuing decrees that account for about 50% of the laws passed by parliament. Overall, most MPs are much more engaged in giving statements to the press than spearheading projects or fulfilling their democratic duties.

Political Parties:

While parliament is no longer a seat of power, political parties still wield considerable influence at the local level since they control appointments in banking foundations (the cornerstone of Italy’s credit system), health agencies, industrial agencies and scores of subsidiary companies.  Many local politicians use this authority to ensure their long-term survival.

The ECB:

To Italy, the European Central Bank (ECB) has become a financial lifeline. With former Bank of Italy Governor Mario Draghi at the helm, the ECB has provided the country with a vital supply of funds and put it in communication with leaders in Washington, D.C. and Berlin. Although President Giorgio Napolitano and Prime Minister Enrico Letta clearly have important roles to play in managing these relationships, the capital markets still look at Draghi as having the last word on Italy’s future, a reflection of central banks’ growing politicization.

The Technocrats and the Bureaucrats:

Napolitano, a former communist, directs a set of institutions that are still capable of commanding change in Italy’s chaotic political environment. The Bank of Italy, allied with the executive branch, is a bastion for the country’s economic (and, occasionally, political) elite. The technocrats that run Italy’s government ministries occupy a critical position within the country’s political apparatus. Two senior officials at the Ministry of Economy and Finance (MEF), Giuseppe Chiné and Vincenzo Fortunato, are arguably more important than the entire Italian Parliament (Former Prime Minister Silvio Berlusconi has jokingly suggested that he would like to return to power as the head of the ministry).

Italy’s largest administrative body, the MEF has the “power to say yes” by allocating funds for growth-oriented projects from the Cassa Depositi e Prestiti (CDP), a joint-stock company owned by the MEF (70%) and banks and other institutions (30%). During the last round of elections, candidates would invariably cite the CDP as the source of funding for their policy wish-list. On the other hand, the MEF’s General Accounting Service allows the ministry to bring the legislative process to a halt (the “power to say no”). During the recent period of fiscal consolidation, Mario Canzio, the state’s general accountant, probably held more influence than any other Italian politician, manager or public administrator.

The Growth of the Administrative State:

Luigi Fiorentino, head of the cabinet at the Ministry of Education, has argued that Italy’s growth-by-decree model ultimately creates more bureaucracy than opportunity. According to his analysis, the implementation of a number of important policies (initiatives to drive innovation, entrepreneurship and infrastructure projects, among others) would require the adoption of over 70 measures  proposed by the prime minister and various public ministries. Clearly, the bureaucracy already possesses considerable power; enacting these and other measures would see the administrative state assume even more decision-making authority from parliament.

All opinions expressed above are personal and do not necessarily reflect the views of the Presidency of the Council of Ministers.

Comments are closed.