Giarre, a town in eastern Sicily, sits above the sea on the slopes of Mount Etna. It was once a famous collection point for the wine produced on the hills above, which was rolled down its main street in barrels to the port below. Today, Giarre bears a far more dubious distinction. The city of 27,000 hosts the largest number of uncompleted public projects in the country: 25 of them, nearly one for every 1,000 inhabitants. So spectacular is the waste that some locals have proposed promoting Giarre’s excess as a tourist attraction.
On an afternoon in September, I toured some of Giarre’s most notorious eyesores with Turi Caggegi, a journalist who has been writing about government waste since the 1990s. Caggegi showed off a partly built, graffiti-covered theater where work has started and stopped 12 times. It has yet to host a show. Not far away stood a hospital that took 30 years to build and was outdated before it was ready to open. Later, Caggegi drove past an Olympic-size swimming pool that was sunk but never completed. “So much money wasted,” he said. “And it wasn’t that they were spending it on productive investments. They were buying votes.”
In 2011 the Sicilian regional government ran a €5.3 billion ($6.8 billion) deficit on a €27 billion ($34.8 billion) budget. This year, with the island’s credit rating hovering just above junk status and Italian Prime Minister Mario Monti cutting subsidies to the regions in an effort to shore up the national budget, Sicily has reached the breaking point. In July a local business leader warned that Sicily, the country’s largest region, risked becoming “the Greece of Italy,” a black hole of economic dysfunction dragging the rest of the country into default. Just as the European Union can’t afford to let Greece crumble, the government in Rome must work to save Sicily.
And yet the comparison isn’t entirely accurate. The danger in Sicily isn’t that the island’s economy will suddenly implode. As with the rest of Italy, the region’s problems are less economic than political. The biggest threats to Sicily’s future are its politicians.
Sicily was once one of Italy’s richest regions, the seat of a kingdom that ruled the southern half of the Italian peninsula. But with the Industrial Revolution, wealth shifted from the island’s grain fields and citrus orchards to the factories and workshops of the north. It was a painful transition. In the early years of the 20th century, roughly a quarter of Sicily’s population left for other parts of Italy or abroad. During the great wave of Italian immigration to the U.S., the vast majority came from Sicily and other parts of southern Italy.
As the private sector shriveled, government grew. Since 1946 the island has enjoyed the official status of an autonomous region, with its own parliament and laws. In most cases elsewhere, self-determination encourages responsibility. In Sicily, the effect has been the opposite. The island’s residents pay the bulk of their taxes to the central government in Rome, which then funnels money back to the region to spend. “The citizen has the perception that what was taken was taken by Rome,” says Francesco Piro, who served as the region’s budget minister in the 1990s. “But what gets given is given by the region.”
As a result, Sicily’s politicians became dispensers of benevolence, handing out jobs and favors, with little incentive to worry about waste. “The politician sees the need and says, ‘I’m going to create a job for you,’ ” says Enrico Del Mercato, co-author of Dead Weight: Waste and Privileges in the Free State of Sicily. “And from that moment begins your relationship of dependence on the politician.” Meanwhile, every reform that gets pushed through the national Parliament in Rome has to be passed once again—often months, if not years, later—in the regional capital, Palermo.
All governments get called upon to tackle unemployment. In Sicily, the solution was to create jobs by fiat. The regional government directly employs some 18,000 workers, five times as many as the region of Lombardy, around Milan, which has twice Sicily’s population. In addition, regional and municipal governments employ tens of thousands of workers on short-term contracts. The city of Palermo alone has 20,000 public workers. The region also funds about 8,000 instructors for professional training programs, which both teachers and students are paid to attend.
The extent of the bloat, and the region’s inability to address it, is on display in the village of Godrano, a one-hour drive south from Palermo. The road winds up into the hilly hinterland, through golden grain fields, past a medieval castle perched on a hill. Set on the side of a small mountain not far from the famous Mafia stronghold of Corleone, Godrano has a population of 1,247, including infants and retirees, and is home to 190 forest workers—all employees of the regional government. Godrano’s mayor is a forest worker; so are the deputy mayor, the president of the village council, and the heads of the departments of tourism and public works. “There are only two types of jobs in Godrano,” says Sebastiano Daniele Bellini, the village’s deputy mayor, “forestry and livestock.”
Sicily’s forest workers are guaranteed by law a set number of days of work per year. During the down months, they’re eligible for unemployment. Sicily employs about 25,000 seasonal workers to keep the island’s 340,000 hectares of patchy woods clear of brush, ostensibly to reduce the fire hazard. By comparison, the island of Sardinia to the north, with 1.2 million hectares of forest cover, employs just 7,000.
As unfathomable as it might seem, the current situation is an improvement over 1996, when the ranks of Sicilian forest workers had reached 40,000. The regional Parliament, recognizing the matter had gotten out of hand, put a cap on new entries. But even as attrition reduced the number of foresters, the government funneled the savings back into the program, expanding the number of days each worker could work. In Godrano, the numbers of days each worker was guaranteed pay rose in 2006 from 51 to 101. In 2009, it was increased again to 151.
It’s so difficult for Sicily to rid itself of unneeded public workers that in the 1990s, the island’s government delegated Resais, a state-owned company nominally designed to promote regional development, to serve as a holding tank for employees who would otherwise be fired. At the time, the region was heavily invested in money-losing local industries, everything from textiles to pastries to petroleum, and it was seeking to disinvest. Each time the government pulled the plug on one of its moribund companies, it moved the affected workers from the failed firm to Resais, which then farmed them out, free of charge, to regional offices, museums, archaeological sites, and municipalities.
At its height in 2000, the company had 5,000 workers on its payroll. “Resais functions like a social safety net,” says Enrico Caratozzolo, the company’s administrator. “Otherwise, these workers would have been on the streets.” Since then, the number of workers has dropped to 300. But there’s a constant flow of new arrivals, most recently 33 workers from the Palermo Mediterranean Trade Fair, who were sent to Resais when their company was shut down last spring. “The idea of an employee [willingly] leaving his office with his box in his hands doesn’t exist in Italy,” says Caratozzolo. “Here you need a tractor-trailer to pull them out.”
In some respects, Sicily’s current crisis is an outgrowth of its last one. When Leoluca Orlando was elected mayor of Palermo 27 years ago, the biggest threat to the city was the Mafia. Bodies had been dropping in the streets of the Sicilian capital, victims of a war between rival families. A previous mayor, Vito Ciancimino, had just been arrested for fraud, embezzlement, and collusion with Cosa Nostra. Orlando responded by overseeing what would become known as the Palermo Renaissance. He canceled city contracts with companies suspected of Mafia ties, encouraged citizens and shopkeepers to stand up to the mob, and presided over the construction of a bunker-style courthouse in downtown Palermo where Italian prosecutors tried hundreds of suspected gangsters, convicting more than 300 of them.
To demonstrate the power of City Hall over the Mafia, Orlando also hired thousands of new employees, offering temporary positions to those most vulnerable to the temptations of the underworld: the unemployed, the disadvantaged, and workers who had lost their jobs when the companies they worked for were shut down for suspected Mafia infiltration. By the time he stepped down from his second term in office in 2000, the violence had abated. The Sicilian mob had retreated underground.
Last spring, with Palermo in crisis once more, the city’s electorate turned to Orlando again. Like the rest of Sicily, Palermo is in danger of running out of money. Among the many reasons: Most of the temporary workers Orlando hired in his first term are still working for the city. In September, when funds expected from the central government failed to arrive, 1,800 workers whose contracts were not renewed blocked Palermo’s streets, occupied its Gothic cathedral, and demanded their jobs back. The agency that employs the protesters, which is responsible for city maintenance, has largely become synonymous with government inefficiency. But that didn’t stop Orlando from racing to Rome to push to release the funds. “If today I fire a thousand people, it’s civil war,” he said.
In July, Prime Minister Monti wrote to Sicily’s regional president expressing “serious concerns” over the island’s finances and extracted a promise that the region would start to rein in its spending. Later that month the region announced it would have to delay payments on some salaries and pensions while waiting for funds from Rome. On the day I visited Godrano, the forest workers hadn’t been paid for two months. “If they close the taps, how are people going to live?” says Girolamo Sileci, the president of Godrano’s town council. “They’re going to die of hunger. In a town like ours, if you take away the forest work, what’s left? Emigration?”
There are signs that the crisis has forced Sicily’s famously obstructionist unions to show some flexibility. A union representing Palermo’s once-temporary workers is arguing for a reorganization of the city’s workforce, with an eye toward eliminating waste and redundancy. “There’s no denying the economic situation,” says Salvo Barone, the union president. “The money is finished. The time of welfare is over.” Meanwhile, the union that represents the region’s forest workers has offered proposals that would put them to work maintaining the island’s archaeological sites, laboring forprivate landowners, or harvesting detritus from the woods for biomass fuel. “We need to find a way to make those workers productive,” says Salvatore Tripi, the union’s regional secretary. “There are no more resources.”
Sicily’s problems are an extreme version of Italy’s. The entire country had been heading toward insolvency long before the euro crisis struck. And while the other members of what was once known as the PIIGS—Portugal, Ireland, Greece, and Spain—have reacted to the crisis by cutting labor costs and regaining productivity, labor costs in Italy have continued to rise. Monti may have pulled the country from the fiscal precipice by raising taxes and cutting pensions, but his success stopped there. A labor reform bill that took months to wind its way through Parliament was so weak when it finally passed that business leaders greeted it with a shrug. The country is roiling with corruption scandals, but a bill drawn up to address them has stalled. And with Italy’s major parties bickering ahead of elections next spring, there’s little chance that anything significant will be pushed through before then.
In Giarre, Caggegi led me to the unfinished stands of what would have been a 20,000-seat polo field. “The whole population of Giarre, babies included, was supposed to come here and watch polo,” he said. “We don’t even have horses. It was like building a hockey rink in Nairobi.”
From a door in the base of the stands, Caggegi and I made our way up the raw concrete steps. Below, we could see runners circling an oval track. Grass grew on the bleachers from a layer of fine black pebbles—coughed up during Mt. Etna’s periodic eruptions. The view from the top was spectacular: the volcano on one side, the sea on the other. “Bread and circuses,” said Caggegi. “That’s what the Romans used to say.” Italians are discovering what happens when the bread runs out.
Faris is a Bloomberg Businessweek contributor.
