The two radical, populist parties preparing for power in Italy, the 5 Star movement and the far-right The League, published on Friday a pact of joint policies for government. The emergence of this anti-establishment, Eurosceptic coalition, more than a dozen weeks after March’s stalemated election, is sending shockwaves across the European Union (EU).
Friday’s pact needs to be approved by memberships of both parties injecting further political uncertainty into the picture. But if the plan is ratified, the coalition is expected to take power imminently.
The reason for the significant concern in Brussels and European capitals is because Italy poses perhaps the biggest threat to the Eurozone’s future. The country has the second biggest debt load in the single currency area at more than 130 per cent of gross domestic product, and its banking sector is under significant stress with massive underperforming loans. The fear is not just that the expected political stripe of the coalition, but also that it may well be weak, unstable and incapable of securing the structural reforms that the country badly needs raising the prospect of political paralysis.
The new administration, in this key G7 nation which has the third largest Eurozone economy, comes after March’s ballot saw no single party or wider bloc winning an overall majority in parliament. The headlines were captured by the 5 Star movement, an anti-establishment group founded around a decade ago by comic Beppe Grillo and now led by 31 year old Luigo Di Maio, which capitalised on a rancourous campaign in which immigration and the country’s economic woes dominated.
After two months of torturous negotiations, 5 Star — whose biggest previous political had been in winning mayoral elections in key cities like Rome and Turin — has reneged on a previous pledge not to enter into a coalition with another party. Ultimately, it took a leap of faith to align with The League — with which it has key policy similarities — after the two’s strong showing in March with, collectively, more than half the vote.
The 5 Star-League coalition represents a worst-case scenario for Brussels. This is especially so given the poorer showing of the two main pro-European political forces that have dominated Italian politics for decades — the right of centre Forza Italia and the centre-left Democratic Party (PD).
A key initial task of the administration will be securing passage of a 2019 budget where Five Star and The League want to see tens of billions of euros of new spending. Key domestic policy priorities include the possibility of cutting taxes in the form of a new flat tax, and introducing a universal basic income.
But most international eyes will be on policy toward the EU. The League’s leader Matteo Salvini has attacked perceived “unacceptable interference” by Brussels in the Italian coalition negotiations since March, while Di Maio has referred to “continuous attack ... from the Eurocrats”, and it is clear that both will push the Brussels to rethink the stability and growth pact, which keeps budget deficits below 3 per cent of GDP.
Salvini has previously asserted that he wishes Italy to leave the EU, while 5 Star has become more pragmatic in its Euroscepticism over time asserting the country should reconsider its role in the EU, and called for a referendum on whether it should keep the Euro single currency. At the same time, The League and 5-Star have also sought a re-evaluation of the relationship of Italy with Russia. This includes calling for the lifting of EU sanctions against Moscow.
With such renewed political angst in a nation where there have been more than 60 national governments in the post-war era, concerns are growing again about the country’s future. There remains significant public concern over corruption, the nation’s migration crisis, and continuing fragility of the economy with double-digit unemployment and low growth. Indeed, only Greece has fared worse in the Eurozone in the last 20 years which has fuelled the political success of 5-Star and The League.
Part of the reason for March’s inconclusive election outcome was the introduction of a new voting system that is two thirds proportional representation, and one third first-past-the-post, to make it harder for any one single party (especially the anti-establishment 5 Star with its growing popularity) winning an outright majority. The threshold for any single party having a working majority is now around 40 per cent of the vote which no party has come close to securing.
It is for this reason that President Sergio Mattarella may ask for a review of the new election law too to see if a less proportional, more ‘first past the post’ system, is better suited to the nation’s needs after the last two months of political uncertainty. This could therefore rehash the constitutional debate the country had in 2016 when the then prime minister Matteo Renzi’s planned reforms to usher in greater political stability to the nation were voted down in a national referendum.
Taken overall, March’s fraught election looks to have been the midwife for a radical, populist coalition that could shake up Europe. While 5 Star and The League won more than half the vote, a key danger is that the new administration may be weak, unstable and incapable of securing the structural reforms that the country badly needs.
Andrew Hammond is an Associate at LSE IDEAS at the London School of Economics.