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MILAN — Italy’s inconclusive election results sent global stock markets tumbling and left the country’s fashion executives disappointed yet hopeful.
This story first appeared in the February 27, 2013 issue of WWD. Subscribe Today.
Jitters over an ungovernable country dragged down the Milan Bourse Tuesday, where the FTSE MIB plummeted 4.9 percent to 15,552.20. Among the Italian retail and luxury stocks losing ground were Brunello Cucinelli, down 2.8 percent to 15.06 euros, or $19.68; Luxottica Group, 1.5 percent to 34.02 euros, or $44.45; Salvatore Ferragamo, 1.8 percent to 20.24 euros, or $26.45, and Safilo Group, 1.5 percent to 8.35 euros, or $10.91.
Feeding into the anxiety, the Nikkei 225 in Tokyo fell 2.3 percent to 11,398.81, while the Hang Seng Index in Hong Kong was down 1.3 percent to 22,519.69. Paris’ CAC 40 sank 2.7 percent to 3,621.92, Frankfurt’s DAX declined 2.3 percent to 7,597.11 and London’s FTSE 100 retreated 1.3 percent to 6,270.44. Wall Street fared better as the Dow Jones Industrial Average gained 0.8 percent to 13,900.13, although it had fallen 216 points the day before on nervousness over the election results.
A fragmented scenario emerged after Italy’s two-day parliamentary election on Sunday and Monday, which ended with the center-left bloc headed by the Democratic Party and leader Pier Luigi Bersani winning the Chamber, Italy’s lower house, but coming short of securing a majority in the Senate. Both houses are needed to govern, so the parties with the most votes will have to form a coalition, which many fear will be weak, or go through another round of elections. In terms of timing, a new parliament will meet March 15.
RELATED STORY: Unemployment, Taxes Top Concerns in Italy PM Race >>
Even with the inconclusive results, industry executives pointed to signs of hope in the rupture with the past marked by the success of former comedian and outsider Beppe Grillo, whose Five Star Movement secured more than 25 percent of votes in the Chamber of Deputies and almost 24 percent in the Senate.
Italy is weighed down by public debt, high unemployment and crimped consumer spending, and a large portion of Italian voters resented former Prime Minister Mario Monti’s austerity measures and lack of immediate benefits in everyday life, turning Grillo and his vehement call for reforms into a new force to contend with.
“This is a very positive result because votes to Grillo reflect how angry Italians are,” said Santo Versace, a former member of Parliament who is chairman of the family-owned firm. Versace lamented a “corrupted” political class that has limited the country’s growth. “This marks a pacific revolution,” he said.
Asked how he views Grillo’s inexperience, he explained that “it’s the easiest job in the world to be in politics, if you work in the interest of citizens, not your own.” In his view, the fashion industry needs a release from “strangling taxes.” He also put more professional schools and less bureaucracy high up on the list of priorities.
Franco Pené, chief executive officer of Gibò Co. SpA, which produces collections for Jean Paul Gaultier, Jil Sander, Rochas, Michael Kors and Roberto Cavalli, among others, also saw a glass half-full. “After an initial and obvious reaction of disappointment and displeasure, as the country needs to be governed for job creation and development,” he said he saw positive elements in the news. “Italy has suffered a lot for 30 years under this political class that has demonstrated it doesn’t have the country’s future at heart and that didn’t foresee this strong reaction,” said the executive.
Pené believes in “self-regulating systems and that, when you touch rock bottom, something clicks. The system could not handle the situation anymore and needed to be cleaned up. And it was, as the old political class that dominated in the past is mainly gone,” he said, citing a number of old-school politicians who have lost out in these elections. Although thrice Prime Minister Silvio Berlusconi, his People of Freedom party and the center-right bloc secured a third of votes, Pené said Berlusconi is now virtually “cut out.”
As for Grillo and his party members, Pené said, “They may be young and inexperienced, but they are uncompromised” in the eyes of citizens. He imagined a new coalition materializing in the next few weeks and that, after a new round of elections, the focus will be on reforming the election law and cost-cutting. He urged Bersani to take a step back and let the young mayor of Florence, Matteo Renzi, emerge.
“If they had let Renzi front the party from the start, they would have easily won,” he said of the alternative politician, who lost primary elections a few months ago. Pené conceded he voted for Monti, although he was “not entirely convinced, after his decision to be in the running.”
Luca Caprai, founder of knitwear firm Cruciani, also imagined a return of Renzi and “an institutional role” for Berlusconi and was optimistic about a new “positive phase” where two big parties would be “obliged to put reforms in motion” in order to avoid new elections. In his opinion, with new elections Grillo would secure even more votes and the existing political class would be “voided and reset.” Caprai believes Grillo is not a politician and would have difficulty governing the country. “He will prod politicians to do what they never did for years because either they find an accord or they will disappear,” said Caprai.
Armando Branchini, deputy chairman of Milan consultancy InterCorporate, was less upbeat, saying that “Italians are good at harming themselves. Looking back at Italian history over the past 60 years, this confirms that Italians vote instinctively and those parties that appeal to reason usually lose. Italians have their interests top of mind, and they believe in absurd promises.”
He also underscored how around “400,000 people live off politics in Italy, more than the sum of those in France, the U.K. and Germany.”
Branchini, who voted for Monti, said Italians don’t need “a revolution or conservative views but serious reforms. Revolutions bring dictators.” He said that in the year Monti was prime minister, exports increased in all sectors. Reforms such as a reduction of political privileges and lightening up the cost of institutions were also relevant for Branchini.
Speaking of necessary steps to boost Italy’s economy, Michele Norsa, ceo of Salvatore Ferragamo, said “increased commitment in infrastructures” such as connections between cities or hotels, and more streamlined visa procedures to encourage foreign visitors to Italy, were a priority. “We also have to work on image. Our growth potential is exponential,” Norsa said.