By ANUPAM SARAPH | 10 December, 2016
In the aftermath of the Prime Minister’s call to clean out black money, when Niti Aayog tweets promoting the digital money solutions of a private company, should you be worried? Especially if this follows the Prime Minister’s call to usher integrity and honesty and appeal to every Indian for support?
Somewhere, the canvassing for digital platforms has diluted the Prime Minister’s bold call that countless were willing to stand in long queues for. It transformed the narrative of black money and shifted to going cashless and digital. The absence of any public discussion, debate or a policy document by the Niti Aayog, while promoting payment systems and digital platforms for transactions of private non-government companies, calls to question our ability to protect national interests and be free from private lobbies and conflicts of interest.
Does digital currency have no colour? Will it eliminate black money? Or is this simply an effort at making the people of India to link their bank accounts to UID and other digital platforms that will severely impact India’s banking system? Is it an attempted takeover by private interests of the Prime Minister’s narrative in order to create havens to hide black money digitally?
ONBOARDING -VIRTUAL ACCOUNTS
Strangely the argument for digital starts with the UID number. The UID is a random number allotted to demographic and biometric data submitted by private parties. It has never been verified or audited to confirm the identity, address or even existence of a real person associated with the number. This means that the existence of ghosts (non existing persons), fakes (real persons with fake identities) and duplicates cannot be denied. Using this number as the basis to open bank accounts, as enabled by the Reserve Bank of India (RBI) in January 2011, onboards virtual customers. The use of the UID number as the basis for KYC, therefore, allows the creation of bank accounts for ghosts, fakes and duplicates.
For sceptics who believe biometrics will prevent such a scenario, there is no compulsion for biometrics to be used in the process of onboarding a customer in a bank. Even if it were required, there is no verification or audit of the biometric ever having happened. Furthermore, if it was the biometric that uniquely identified you, making it the safest identifier, why would your UID number ever be needed to query the UIDAI database? Your biometric would have been the sole requirement to open your bank account, not your UID number.
UID based eKYC, or remotely accessing information associated with an UID number as KYC, enables the creation of bank accounts without physical presence of any individual. According to the UIDAI, eKYC brings scale to the ease of onboarding customers. eKYC too was allowed by the RBI in 2012 after having raised serious concerns and offering a spirited resistance.
The UIDAI eKYC procedures require that no data is kept by those initiating the eKYC other than the response from UIDAI. This response from the UIDAI is to be kept for at least six months for audit purposes. The complex network of agencies providing eKYC, the absence of audit processes being in place and the complete absence of permanent record of customer information leave no means to verify and audit the existence of real persons in whose name millions of bank accounts may have been opened.
Bank accounts opened solely with the UID number or with documents obtained on the basis of an UID number are indistinguishable from mule accounts, or accounts that are controlled by third parties for the purposes of money laundering. Those in control of such bank accounts can, therefore, use them to distribute income and accumulate black wealth to keep it out of the tax radar.
The orders of August 2015 of the Supreme Court of India actually make linking, seeding or even doing a eKYC with UID numbers illegal. The RBI has, however, yet to notify the banks and payment systems operators to discontinue and disconnect the use of the UID number in banking operations. The failure to take cognisance of the Supreme Court’s orders and even issue a simple notification prohibiting the use of the UID number in banking is disregard and disrespect of the rule of law and contempt of the Supreme Court’s orders.
Jan Dhan bank accounts are the tip of the iceberg in terms of bank accounts opened with UID as the sole KYC. However, they are visible as a category of accounts opened solely with UID. 76% of Jan Dhan accounts were zero balance till one rupee was added to many accounts to bring down zero balance accounts to 23% so that the concentration of money deposits would not be noticed. There has been a rise Rs 32,000 crore in Jan Dhan deposits in the two weeks since demonetisation. The RBI does not publish statistics of the number of accounts with balances more than Rs 5,000…25,000, 35,000 and 45,000. If it did, it may tell some stories.
ANONYMISING MONEY TRANSFERS
When you link your UID number to your bank accounts, your bank seeds it with the National Payments Corporation of India (NPCI), a non government Section 8 company under the Companies Act. The NPCI overwrites the account number associated with your UID with the latest account number you associated with your UID number. If you received money into your SBI account seeded with your UID number and later linked your HDFC account with your UID number, you have made the money transfer untraceable. This can allow multiple accounts to receive money without being traceable by simply associating them transiently with the same UID number.
When you create a Virtual Payment Address (VPA) using NPCI’s Unified Payment Interface (UPI), you anonymise your money transfers. Using the VPA your transactions will not reveal your account number to the parties receiving your payments. So money you transfer from your VPA to yourself (or any other person) cannot be traced back to you.
Mobile wallets allow you to receive money into your mobile wallet account. Mobile wallets need a mobile number. As long as you can obtain SIM cards you can charge each with up to Rs 10,000 without needing to do any KYC and Rs 100,000 if you do a KYC. If your mobile number doesn’t identify you, your money transfers will not be traced back to you. If you used a ghost, fake, duplicate or third persons UID number to obtain a SIM card, it does not trace back to you. Unfortunately, TRAIz has been using UID numbers to do KYC for issuing SIM cards.
GENERATING, PARKING BLACK
Anonymous or untraceable money transfers are considered by bankers as money laundering. Money laundering is used to deposit or transfer black money that may have arisen from corruption, illegal trade or avoidance of tax during transactions.
Digital platforms that anonymise the payments made into bank accounts, accumulate black wealth and hide black income. These platforms allow the income to stay out of the tax radar as it is distributed across multiple bank accounts linked with different identities. These platforms accumulate black wealth as they store the operators’ black income and make it indistinguishable from white money in other bank accounts.
Digital platforms offer masking, scale, automation and remote operations, something cash cannot ever provide. It is, therefore, a dream come true for black money hoarders, terrorists and organised criminals. The combination of virtual accounts and anonymising money transfers creates unprecedented opportunity to launder and hide black money.
Going digital, therefore, does not enforce the Prevention of Money Laundering Act or do away with the responsibilities under the Payment and Settlement Systems Act. It does not automatically ensure that the provisions of the Income Tax Act, Central Excise Act, Central Sales Tax, Customs Act, Service Tax Act, Value Added Tax acts, Property Tax Acts, Road Tax, Toll Tax etc are complied. It does not eliminate black money.
WHAT CAN –GOVERNMENT DO?
Firstly, the government needs to eliminate virtual or benaami accounts. All UID based accounts need to be frozen till they can be confirmed as legitimate accounts of real people through pre-UID KYC with no ID or address proof obtained by using UID numbers. Next, the government needs to end all payment and settlement systems, digital wallets and payment interfaces that create virtual addresses or anonymise the payer or payee. Digital transfers should be through NEFT or RTGS.
Digital should be a choice of the citizen, the consumer and not a state dictate. Eliminating the choice is exclusion of those who cannot or do not wish to be digital. In a country with 70% people living in rural India, 95% of who are unbanked, and less than 9% of who have access to internet, digital banking is exclusion of the people. Even in urban India, mobiles experience call drops, their data plans don’t work, the complaints don’t get addressed. Furthermore, there is no inherent virtue in being digital, nor a constitutional requirement to become a digital republic.
The success of the Prime Minister’s call for honesty and integrity hinges on ensuring the government actually has a think tank to see alternate scenarios, before the brash and expensive policies pushed by bureaucracy in collusion with private interests are implemented. It hinges on ensuring government committees are not filled with persons with conflicts of interest, those who lack a public mindset and those who do not understand national interest. It rests on ensuring respect for the rule of law, the respect for orders of the Supreme Court of India and its orders. It hinges on a policy of governance that is driven by the purposes of enabling fulfilling lives for all and not mere digitisation or automation of their lives. It rests on revising government processes to build trusting relationships with citizens and tracking and auditing the government’s implementation of its budget and programmes, not people’s expenditure on living their lives. It hinges on replacing a ruling bureaucracy with people’s public service, where every person serves in the government for at least three years of their life.
Prime Minister Narendra Modi has the confidence of the nation to change systems and deliver honesty and integrity in government before the New Year as promised by him on 8 November 2016.
Dr Anupam Saraph is a Professor, Future Designer, former governance and IT adviser to former Goa Chief Minister Manohar Parrikar and the Global Agenda Councils of the World Economic Forum.
Italian Prime Minister Matteo Renzi may be facing defeat in a game of high-stakes poker with the electorate. If the Dec. 4 constitutional referendum fails, there are dark clouds on the horizon for Europe’s future. The country is in poor economic shape and financial markets are alarmed.
The photo montage on the stage behind the Italian leader looks more like a wanted poster: It depicts seven sinister looking men frowning, some of them well advanced in years. They look like mafia godfathers.
Italian Prime Minister Matteo Renzi uses the images to show who his adversaries are. Late in the evening at a trade fair in Bari, he is railing against those who would buck progress and vote against his planned constitutional reforms on Dec. 4. At the head of the pack are these seven elderly signori, including four former prime ministers, a former Constitutional Court president, a former government minister and the leader of the strongest opposition party.
The prominent rebels have divergent reasons for their objection to the upcoming national reform referendum. But they are united in their verdict that the new constitution, promoted as the key to slimming down the state, would damage Italy’s democratic foundation.
The fact that Renzi is publicly attacking his critics betrays his nerves as the vote approaches. Recent polls show opponents leading, prompting the prime minister to increasingly invoke the country’s “silent majority.” Even if the ballot may show that the vote is a simple choice between “yes” and “no,” in reality, Renzi has said, it’s “now or never.” The opportunity to set the course for a better future for Italy after decades of paralysis won’t come around again soon, he says.
The ‘Mother of all Battles’
The prime minister has said he will step down if he loses the referendum. Back in January, he declared the constitutional reform to be the “mother of all battles” and unnecessarily tied his own future to its outcome. It was an act of hubris that has transformed the referendum into a vote on his leadership. Those who want to see the back of the prime minister must merely vote “no” in the referendum.
If the government were to fall, it would hit highly indebted Italy, a core EU member state, at a sensitive time. The Italian central bank in Rome has already registered a “strong increase in uncertainty” on financial markets. The risk premium on Italian sovereign bonds relative to the interest rate Germany must pay its creditors has doubled since the beginning of the year, as trust in Italy had declined among investors. Economists like Nobel laureate Joseph Stiglitz and Germany’s Hans-Werner Sinn are already speculating over the possibility Italy will leave the eurozone.
The pro-European Renzi, 41, had until recently been considered a bulwark against that scenario. But what happens if he falls? A referendum on whether Italy should remain a member of the common currency could follow. If Italy, the third-largest economy in the currency union, were to leave, it would mean doom not only for the euro. It could put the entire European Union at risk.
This domino-effect theory has been useful to the prime minister and his allies — and flanked by the Financial Times newspaper — as a warning against the dangers of a “no” vote. Ever since the EU-critical, populist Five Star Movement (M5S), under the leadership of former comedian Beppo Grillo, has been closing in on Renzi’s party in the polls, the prime minister, a talented speaker, has subtly been presenting the vote as a choice between stability and disaster.
With his late-night appearance in Bari, where he evoked “change for the years to come,” Renzi ended his 1,000th day as prime minister. Earlier in the day, he had enjoyed a meal with US President Barack Obama and German Chancellor Angela Merkel in Berlin and, after returning to Italy, spoken to the press in Rome, where he detailed his achievements in office before doing a live TV appearance and ending his day with a speech in the port city of Bari at 10 p.m.
It was a busy day if not particularly effective. At lunch in Berlin, the recalcitrant Italian was seated at the greatest possible distance from the chancellor and speaking to journalists in Rome, he said his ambition for his country was not to “end up like Greece, but to do better than Germany.” Then, upon arrival in Bari he learned that even his most important party ally in the region had defected to the opposition. The president of the Apulia region skipped Renzi’s appearance to attend an event held by reform critics.
Renzi’s Worst Crisis
In the run-up to the referendum, Renzi is experiencing the worst crisis of his tenure. As government leader and chairman of the center-left Democratic Party (PD), Renzi has become enmeshed in an exhausting war on three fronts: against the European Institutions, against a large segment of the Italian opposition and against the left wing of his own party.
One PD senator says that a “bunker mentality” now characterizes the Renzi camp and those close to him. And it does indeed seem that the youthful and dynamic Matteo, who shoved his predecessor out of office in 2014 and was seen across Europe as a man ready to pull up his sleeves and get to work, has now lost his calm, lost his willingness to listen and lost his way. He is increasingly closing himself off out of annoyance that his achievements aren’t being appreciated enough.
Renzi’s government has introduced a monthly welfare payment of €80 ($84) for low-wage earners; it has liberalized the labor market and created hundreds of thousands of jobs, even though some of them are temporary; it has improved the country’s sluggish judicial system; and it has ended Italy’s seven-year period of decline. Though growth has been extremely meager, the economy is expanding again.
Why, then, is a majority of Italian voters ready to throw him out of office? Is it because Italians are “defeatists who are prepared to the point of self-flagellation to say ‘no’ to everything,” as claimed by Paolo Sorrentino, director of the Oscar-award winning film “The Great Beauty?”
It’s not just that, Renzi’s critics argue. The prime minister is his own worst enemy. After all, they say, a man who, after just 23 days in office and despite an ongoing recession, announces that he wants Italy to play the “leading role in Europe it deserves” may very well become a victim of his own ego and loose tongue.
One who might know is Ugo De Siervo. The constitutional law professor at the University of Florence once had Renzi in class. Ever since his former student made the constitutional reform into a referendum on his own political future, the professor has taken to the barricades. Together with 56 other law professors, he signed an open letter of protest pointing out the deficiencies in Renzi’s pet project and castigating him for the “flood of slogans” that came along with it.
De Siervo doesn’t shy away from television cameras or large stages. In Florence on Nov. 10, he railed against the plans to reframe Italy’s constitution in front of 2,000 listeners and warned against a “recentralization of the kind we haven’t experienced since the 1940s,” the country’s fascist era. He says the argument that the Senate must be stripped of some of its power so that laws can be passed more swiftly is bogus. “What we need,” he says, “are fewer, but better laws.”
Under the reforms, Italy’s upper house of parliament would be trimmed from its current 315 members to 100. Furthermore, they would no longer be directly elected and their rights would be limited. For Renzi, the weak executive branch combined with a sluggish bi-cameral legislative procedure is a thorn in his side. But the constitutional reform, in combination with the planned new election law, would grant the country’s strongest party and its prime minister an unknown amount of power. The fears of the constitutional law experts appear to be justified.
Only after Grillo’s Five Star Movement secured the city halls of Rome and Turin in June did Renzi and his backers begin rethinking the matter. Though he exuded confidence on the day after the municipal elections and claimed that mayoral elections “are not predictive of national politics,” the elephant had nevertheless suddenly entered the room: What would happen if the extended powers created by the constitutional reform and a new election law fell into the wrong hands?
Renzi’s Most Toxic Opponents
Grillo’s M5S backers count today as Renzi’s most toxic opponents. They travel across the country campaigning against the reforms on market squares. They’re also going on the offensive in parliament with ideas like that of halving the salaries of parliamentarians rather than slashing the Senate, which would result in comparably less savings.
M5S finds itself in diverse company, part of an Anti-Renzi front that extends far beyond the limits of party loyalty. The prime minister is right when he derides his opponents’ camp as a “hodgepodge” and accuses them of being driven by motives ranging from the most noble to the basest. But that doesn’t make his mission any easier.
He faces massive opposition from a radical left that has never warmed to Renzi, who was raised in a middle class, conservative Christian Democratic family. There’s also opposition on the far right, ranging from the right-wing populist camp of Lega Nord to that of right-wing extremist Casa Pound. Then there’s the educated middle class, which at best views Renzi as a “talented boor,” as Ferruccio de Bortoli, the former editor in chief of the respected Italian daily Corriere della Sera, puts it.
Speaking from his office in Milan, Bortoli says the Dec. 4 vote should not have become a referendum on the government’s work. But he also takes the liberty of pointing out that, “under Renzi, the remarkable deterioration of government finances has been cheerfully ignored. In 2015 alone, the debt has grown by 36 billion euros.” If the European Central Bank (ECB) stops holding a protective hand over Italy, Bortoli adds, “when, for example, Mario Draghi steps down in 2019, things here could come to a rapid end.”
Draghi himself, of course, the sober ECB president, would never say such a thing. Instead, the Rome native tries to spread good news at events like the European Banking Congress that took place in Frankfurt just over a week ago. Following the Brexit shock, Draghi can even understand, and forgive, the event’s host — the head of Germany’s Commerzbank — for introducing him as the “president of Great Britain.”
Draghi positively noted that economic output in the euro zone had in 2016 exceeded its pre-crisis levels for the first time. But he then segued into a list of shortcomings. He spoke of weak profits at euro-zone banks, bad loans and the European economy’s overreliance on loose ECB monetary policies.
Even though Draghi didn’t once mention Italy, it sounded as though the central banker was talking about his home country. There, gross domestic product (GDP) remains at close to 8 percent below its pre-crisis level. Banks are struggling to survive, with a total of 360 billion euros worth of bad loans on their balance sheets. And government coffers in Rome would long since have emptied out were it not for the zero interest policies of the ECB, which have been keeping the country, with its 2.22 trillion euros in sovereign debt, afloat for years now.
Even though the country’s national debt is 40 percent greater than it was 10 years ago, Italy now pays one-third less in interest thanks to ECB purchases of 240 billion euros worth of Italian government bonds. In a now legendary June 26, 2012 speech, Draghi promised he was determined to save the currency union, regardless of the cost. Politicians in Rome, it seems, listened and interpreted that to mean they would be getting a free ride.
‘Too Big To Fail’
Italy’s economic output is nine-times greater than that of Greece. Due to its sheer size, the European Stability Mechanism, the euro backstop, would be unable to bail it out. Experts say the country is “too big to fail” and “systemically relevant.” As such, the Italian patient must be kept on life support.
If Italy fails, so too will the euro, experts warn. And “if the euro fails, then Europe will fail,” Angela Merkel has said. These equations play right into Matteo Renzi’s hands and they provide him with the confidence necessary to draft his budgets. Although the country’s sovereign debt now stands at 133 percent of GDP — second only to Greece in the euro zone — the prime minister has nevertheless promised additional gifts to the electorate in the run-up to the referendum, including 13 billion euros in corporate tax relief and 7 billion euros for increased pension payments. He plans to lower the hurdles to early retirement and provide improved pay for government jobs.
The article you are reading originally appeared in German in issue 48/2016 (November 26, 2016) of DER SPIEGEL.
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In May, Rome reached a binding agreement with the European Commission that new borrowing in the 2017 budget could not exceed 1.8 percent of GDP. Now Renzi wants to increase that amount by one-third, pointing to the extraordinary burdens created by the refugee crisis and this summer’s earthquake in Central Italy. He has had little difficulty in artfully conflating the dilapidated state of Italian schools with fiscal restraint ordered by the European Commission. “The stability of our children is more important than the stability of European bureaucracy,” he has said, a reference to spending rules stipulated under the euro-zone Stability Pact.
Patience Is Waning
And who was going to object at a time when the last bodies had just been pulled from the rubble in the earthquake stricken area? Angela Merkel, whose dislike of dogs is well known, didn’t even object when Renzi brought “Leo,” the police dog that rescued a child from the rubble, to her at a summit at the headquarters of Ferrari in Maranello. “Zampa,” the prime minister said, ordering the canine to present its paw. He obeyed, as did Merkel, who took his paw and shook it.
Brussels understands that Renzi is in the difficult situation of having to assert himself against populists of all stripes in his country. Nevertheless, patience with his borrowing and anti-EU polemics has its limits. European Commission President Jean-Claude Juncker said not long ago: “The Commission is being insulted. I grin and bear it. I put my resentment and my irritation, which is significant, in my pocket. But people should stop thinking that I’m naive. I am not.”
There have been times when relations were better — in May, for example, at a meeting between EU leaders and Pope Francis. Renzi arrived — not the first, as usual — but he quickly and determinedly worked his way up to the front of the Vatican’s stately Sala Regia. One could have been forgiven for thinking he was the host the way he distributed kisses to Juncker and EU foreign policy chief Federica Mogherini — and a handshake for the German chancellor.
Renzi views himself as being at the very top of the European hierarchy, right alongside Angela Merkel and François Hollande. The three also briefly formed a triumvirate within the EU at Renzi’s insistence, but it unravelled following a crisis summit in September. Prior to the summit, the Italian leader had fallen out of favor with a series of outbursts directed at Brussels and Berlin.
One senior EU diplomat explained the about-face by noting: “The special relationship between Germany and France can’t be expanded by just any third party.” Renzi is now pouting again, stressing the sacrifices his country is being forced to make as a result of sanctions against Russia, which results in considerable economic costs for Italy. Also due to the refugee crisis, which has indeed required Italy to take extraordinary measures with the deployment of its Navy and Coast Guard at the external border of the EU.
‘More Good than Bad’
Recently, Renzi has been retaliating for what he sees as a lack of appreciation of his efforts by showing more frequent contempt for EU institutions. “We want to address the needs of Italian citizens, not those of the Brussels technocracy,” he says when he wants to disregard previously agreed to austerity targets. He has also noted that there are few consequences for his outbursts. Brexit has made it easier for Italy to blackmail the EU and increased his room for maneuver: He needs money and the EU needs reliable partners.
The result has been accounting tricks and minor shenanigans. In the past, when the Italian prime minister appeared on television, he often did so with both Italian and EU flags behind him. Recently, though, the European ones have been absent. In the middle of the year, Renzi’s senior official for EU affairs remarked that “the EU is not an option — there is no alternative and Italy like Germany understands that even better than other partner countries.” Today, however, it is unclear whether Renzi still stands behind that position. The Italian press has recently been describing a current “il grande gelo,” or big ice age, between Merkel and Italy’s leader — largely the product of Renzi’s recent attacks, which have “struck like torpedoes in Berlin,” as the Italian daily La Repubblica recently described.
The tone coming out of the Chancellery in Berlin is considerably less martial. Sources close to Merkel say they hope Renzi will win the referendum because “we want to continue working with him. He has achieved more than all of his predecessors.” One senior Chancellery official says that while Renzi is irritating when it comes to Russia sanctions and deficit rules, it is also clear “he does more good than bad.”
When Rome pledged in April to stop sending refugees who arrive on Italy’s shores to Northern Europe, Merkel’s staff was skeptical. But that perception had changed by summer. “Renzi did what he promised on the refugee issue,” says Jürgen Hardt, the foreign policy spokesman for Merkel’s conservative Christian Democrats. In the event the prime minister fails the referendum, he says, one can only hope that “Italy doesn’t fall into another national crisis.”
Renzi believes that Milan is key to his country’s future. In 2015, he took both Angela Merkel and her husband on a tour of the World Fair that took place in the city. There are now plans for 2.5 billion euros in measures aimed at further boosting the city. The prime minister is a fan of flagship projects, and when it comes to finding a symbol for a dynamic, cosmopolitan Italy, he believes Milan is in a league of its own.
In the past, too, the city had often been the starting point for trends that would later sweep across the country — during the era of the Mussolini fascists and in the time of socialist rule under Bettino Crexi, during the dismantling of the party landscape during the 1990s and amid the political rise of Silvio Berlusconi. Renzi now also wants to score political capital in the city that companies like Gucci and Prada call home. “The country is counting on Milan,” he said at the beginning of November at a dinner for which guests allegedly paid up to 30,000 euros for a plate of pinto-bean risotto with a side of Renzi’s worldview.
The Helping Hand of the ECB
Beyond its world-famous fashion and design, Milan is also home to the stock exchange and important financial institutions. The balance sheets of the latter are laden with potentially explosive Italian government bonds whose value will depreciate if interest rates rise — a development that is now widely expected in the wake of Donald Trump’s election. This could prove life-threatening for Italian banks, which also happen to be holding one-third of all problem loans in the euro zone.
“The non-performing loans are the result of 15 years of stagnation,” says Clemens Fuest, the head of Germany’s Ifo Institute, a respected economics think tank, and also one of the toughest critics of Italy’s policies. He warns that if the government is forced to step in and bail out or liquidate banks in the near future, it would hit many Italian creditors, including private households. Under the rules of the European banking union, they would be required to pay their fair share, which would create a PR disaster for Renzi’s government.
As such, it is very possible that any future Italian prime minister will have to rely on ECB President Mario Draghi in faraway Frankfurt for quite some time to come. “If the referendum fails, it could trigger an extension or even expansion of the ECB’s bond buying program,” Fuest says. “That, however, would be a clear violation of the ban on financing governments through the ECB.” The economist believes the Italian government will ultimately leave it to the ECB to rescue the country’s banks so that, in the end, as happened in Greece, it will provide emergency loans in order to protect the entire financial system.
How things will proceed if the banking crisis escalates or the constitutional referendum fails — that is something Denis Verdini is also brooding over inside the Rome restaurant Il Moro. Verdini, a white-haired member of the Italian Senate, was long a close confidant of former Prime Minister Silvio Berlusconi before he and 17 other senators, along with eight members of the lower house, bolted to the Renzi camp. That move gave Renzi the majorities he needs in the two legislative chambers.
What makes this dependence even more astounding, though, is that Verdini represents precisely the kind of politician that Renzi originally promised to get rid of. He is a master at back-room deals, has been convicted of corruption and remains the subject of ongoing legal proceedings over, among other things, suspicions he formed a criminal organization.
The public prosecutor in Rome recently advocated a four-year prison sentence for Verdini. The well-networked senator, who tends to have a fine nose for approaching Italian political storms, took note of the prosecutor’s motion but nevertheless continues to pull strings behind the scenes. At the moment, he’s exploring potential majorities that could be assembled after the referendum, regardless which way it goes.
The Italian prime minister, says Verdini, is the least of his worries. Renzi, Verdini told a confidant, is smarter and shrewder than all of his predecessors. “Berlusconi may have been a true boss and Matteo may be more of a lightweight, but he does get more done.”