Election watch: Italy

Polls suggest that no party will win a majority in Italy’s general election in March. The outcome is likely to be a coalition or minority government that will be so fragile as to have implications for the European Union.

 

Background

President Sergio Mattarella dissolved parliament on 28 December, readying the country for what is likely to be a highly competitive legislative election. He called for parties to make ‘adequate proposals – realistic and concrete ones’, and reminded politicians that unemployment remained the primary concern for many Italians.

The average government lasts less than 12 months in Italy, making it the least stable democracy in the world by government turnover. The P.D., a centre-left, pro-E.U. party, has been in power since the last elections in 2013, but in that time Italy has seen three prime ministers. The next government is unlikely to be any more stable, a problem exacerbated by a new electoral law that will be used for the first time. Known as Rosatellum, after Ettore Rosato, the P.D. leader in the lower house of parliament, it risks preventing any party or coalition from forming a government.

Coming up Rosatellum

Under the new system, around a third of legislators will be chosen according to first-past-the-post principles. The remaining two-thirds will be elected according to the proportion of support their party receives nationally. The law is designed to encourage coalitions, so that at a local level, groups of parties will have a clear advantage in winning the first-past-the-post seats.

The law was fiercely opposed by the anti-establishment party M5S as well as by left-wing parties, who are not willing to form coalitions with other parties, but unsurprisingly it was supported by the main right-wing parties, Forza Italia and Lega Nord, which have announced a common platform along with the post-fascist Fratelli d’Italia.

The problem is that it is unclear whether Forza Italia and Lega Nord will win a majority, or indeed whether any major faction will, either the M5S alone or a left-wing coalition of the P.D. and smaller parties.

It’s the economy, stupid

All parties will concentrate on the country’s major economic challenges. Italy is the third biggest economy in the eurozone, but it has the second-highest debt in the single currency area. Meanwhile, unemployment rests at a stubbornly high 11 per cent, rising to 35 per cent among young people. Italy’s economic problems have been exacerbated by the migrant crisis. As one of the gateway countries to the E.U. from North Africa and the Middle East, its public services have been stretched by an influx of refugees and economic migrants. GDP per capita has risen by less than 5 per cent in 18 years.

In this context, Italians have rejected the E.U.’s preferred ‘austerity’ model for the bloc’s post-2008-crisis economy. This explains why, despite a public debt-to-GDP ratio of 132 per cent, none of the major parties are pledging to reduce it. The P.D. is instead offering EUR50 billion in tax cuts. Forza Italia, the party founded by an infamous stalwart of Italian politics, Silvio Berlusconi, wants to introduce a flat income tax. Lega Nord is pledging the same.

Forza Italia is also proposing a EUR1,000 basic monthly income for every citizen, co-opting the longstanding proposal by the M5S to provide a basic income of EUR780. Wealthier countries in Europe and North America have so far baulked at the expense of introducing such a universal basic income.

The year of the Eurosceptics

In the national consciousness, Italy’s economic woes are closely linked to the euro. Italians are increasingly frustrated with the currency, which they adopted in 1999. Nearly half of Italians believe the euro is bad for their country.

Italy has long struggled to retain competitiveness, due in part to a rigid labour market, a reluctance to embrace new technologies, and low productivity. However, before joining the euro, the government was able to devalue the national currency, the lira. This made exports cheaper and imports more expensive, allowing Italy to run a large trade surplus with Germany, which remains the country’s top export destination.

However, the euro is overvalued for Italy’s economy, making its exports increasingly uncompetitive, while Germany has experienced the opposite effect. Moreover, Italy’s third and fourth-largest export markets are the U.S. and United Kingdom. Trade with the U.S. is threatened by the Trump administration’s mounting protectionism, while trade with the U.K. is jeopardised by that country’s decision to quit the E.U. and its single market, which could see heavy tariffs imposed on Italian luxury goods, cars and foodstuffs.

The currency is certainly not the sole cause of Italy’s struggling economy, but it is an easy scapegoat, and the leading parties are aware of this. M5S no longer believes the country should exit the euro, but does want to renegotiate the terms of belonging to the currency zone. Lega Nord has proposed the return of the lira.

Italy will not leave the E.U. altogether – there is little support for such a suggestion. However, if Italy’s next government is led by the M5S or the Lega Nord-Forza Italia coalition, it will challenge E.U. institutions pushing for greater co-operation between member states.

It could also lead to a split between countries receiving large numbers of migrants and countries that reject the E.U.’s efforts to distribute migrants across the bloc, as well as splitting the E.U. in its negotiations with Britain over Brexit. This could be destabilising for the E.U. as it decides on a political path.

Is Berlusconi back?

Silvio Berlusconi is one of the enduring figures of Italian politics. He has been prime minister four times and has founded, dissolved and re-founded parties. He is currently the president of Forza Italia, Italy’s main centre-right party.

Earlier this month, Berlusconi unveiled a new logo for his party, with ‘Berlusconi Presidente’ in large capital letters across it – in Italian, the title of the prime minister is ‘Presidente del Consiglio’, or president of the council. This is despite the fact that, given his conviction for fraud, he is ineligible to take the position of prime minister.

Instead, if Forza Italia, Lega Nord and Fratelli d’Italia are able to form a government, Berlusconi will attempt to take on the role of kingmaker. He is allegedly attempting to appeal his ban, but if he is unsuccessful, he would likely have the final say on the coalition’s prime ministerial candidate. So far, Berlusconi has put forward a number of suggestions, including Antonio Tajani, the current president of the European Parliament, Sergio Marchionne, the CEO of automaker Fiat Chrysler, and the former head of the Carabinieri military police, Leonardo Gallitelli.

Despite Berlusconi’s continuing influence over Italian politics, he could be forced to cede territory as a result of his new alliance. However, Roberto Salvini, Lega Nord’s leader, will likely insist that he himself should be prime minister.

There are other major differences that could prove fatal to the alliance. For example, Berlusconi claimed in a recent interview that Italy’s economy would be badly damaged if it left the euro, and that Lega Nord was in agreement with him on this point. The spokesman for the far-right party quickly refuted this claim, saying that if Lega Nord won the election, it would immediately begin preparations to leave the currency zone.

Berlusconi has also proved a flighty potential partner, saying in December that current Prime Minister Paolo Gentiloni should stay in office if there were no clear majority. Furthermore, Forza Italia only agreed to a formal joint platform in January after months of refusing to sign a contract.

Outlook

A2 Global predicts that there are two likely scenarios for the next Italian government, neither of which will bring stability. Because of M5S’s refusal to work with other parties, even if it wins the most votes it is unlikely to be able to form a government. An M5S minority government would not win the confidence of parliament.

The first possibility is that the P.D. wins just enough votes to form a coalition government with left-wing parties. The P.D., having moved further away from the left in recent years, would need to convince its potential coalition partners of its commitment to social democratic values. The junior coalition partners would also demand key ministerial posts influencing work, pensions and the economy.

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