Italian progressives must try harder

By Raffaele Danna
12 June 2018
Italy Italy
After much wrangling M5S and Lega have managed to secure a populist government in Italy
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Let us rewind to 4 March 2018. After a long and divisive electoral campaign, mainly focused on issues like immigration, fiscal policy and a Trumpian-sounding ‘Italy first’ slogan, the Italian political scene is profoundly altered. It is the first time the new electoral law has been put into practice – a mixed system where around 62% of seats are allocated proportionally with the rest won on a majoritarian basis.

The anti-establishment, allegedly neither left- nor rightwing, opaquely internet-based Five Star Movement (M5S) came out as the party on top, with 32% of the vote.

The centre-right coalition was the strongest political force with a 37% of vote. Within the coalition, the strongest party was not, as expected, Berlusconi’s centre-right Forza Italia. FI received 14% of the vote, but Matteo Salvini’s Lega, a strongly rightwing, nativist, Eurosceptic party, which captured over 17% of the vote, resulting in Salvini replacing Berlusconi as leader of the centre-right coalition. Meanwhile the centre-left Democratic Party (PD) was the main loser of the vote, which marked the end of five years in power including three successive and profoundly different governments. Despite having designed the new electoral system, the party languished at 18% of the vote.

Following the vote, no one of these forces could hope to form a government alone: alliances were necessary. Luigi di Maio, the leader of M5S, repeatedly refused to form a coalition with either the PD or the centre-right coalition, refusing to deal with Berlusconi or PD leader, Matteo Renzi.

At the start of May, talks between M5S and Lega pointed to the possibility of an alliance between the two parties, confining Berlusconi and Renzi to the margins of the political scene.

Despite pressures from the president, Sergio Mattarella (PD), negotiations to design a government deal lasted weeks, with several drafts leaked to the media showing a contradictory bargaining process. One draft in particular contributed to escalating tensions, as it included the possibility of bailing out 250bn euros in government bonds hold by the ECB. Such a proposal disappeared from the final agreement, which was allegedly voted through by a majority of both Lega supporters and M5S members. This ‘government contract’ is a protean program, including higher public spending and lower taxes: a circle impossible to square given Italy’s high public debt and the limitations set by European regulations. As a matter of fact, the program was quite vague on how such bids would be financed. In the meanwhile, German media outlets were boasting with unnecessarily bitter irony, some even portraying Italy as a country of aggressive scroungers.

The last step to form a government was selecting a prime minister, and the choice fell on a complete parvenu to the political scene. Giuseppe Conte, professor of private law at the University of Florence, who had never hold a political office before (not even at a local level) and who allegedly played a relevant role in drafting the government program, was chosen as possible candidate by the two parties.

Conte presented President Mattarella with a list of possible ministers, including Paolo Savona as minister of economy and finance, the most delicate office. Savona is an economist and university professor who has worked in the Bank of Italy as well as the OECD and previously served as economy minister between 1993 and 1994. He is known, however, for his outspoken criticism of the euro system.

Despite a reassuring post published by Savona, on the evening of 27 May 27, Mattarella rejected his appointment, and proposed in his place Giancarlo Giorgetti, Salvini’s closest collaborator. Salvini and M5S leader, Luigi Di Maio, saw this as an illegitimate interference and forced Conte to reject any alternative solution, blowing up the government building process. Di Maio went as far as menacing an impeachment procedure against Mattarella. Salvini argued that Italy had become a country with ‘limited sovereignty’, unable to choose its own leaders.

In a speech later that evening, Mattarella explained his decision. He argued that his role is to act as a safeguard, that the stability of the country and of people’s savings must have precedence over factionalism, and that Italy’s membership of the euro area was not a theme of the election campaign and had not been openly discussed. Mattarella’s actions were within his constitutional mandate. He appointed Carlo Cottarelli, former IMF economist and commissioner for the Italian spending review, to form a government. But a Cottarelli government would have been very unlikely to find a majority in parliament, and would merely play a transition role towards new elections.

What followed, was two days of chaos. Political forces split between supporters and opponents of Mattarella, triggering an institutional crisis. If Italians had voted as they did on 4 March, a coalition between M5S and Lega would have gained an overwhelming majority of seats in Parliament, and that would really have made ‘Quitaly’ (Italy’s departure from the European Union) a more plausible scenario. A selloff on financial markets led the Milan stock exchange to lose all the gains made in 2018. The spread between German and Italian government bonds jumped beyond 300 basis points on 29 May. Various talks started to plan for new elections in July.

It is impossible to tell whether Matterella lost control of the situation. Di Maio eventually dropped the impeachment procedure on 29 May and was again received by the president. Despite strong gains in the polls, Salvini agreed to come back to the negotiating table. On 1 May, a government was finally agreed. Conte was appointed prime minister with Di Maio and Salvini as deputy prime ministers. Di Maio also serves as minister of economic development, labour and social policies and Salvini as interior minister. Giovanni Tria, professor of political economy at the University of Tor Vergata, was appointed minister of economy and finance – a choice more aligned with EU institutions. Savona was moved from the ministry of finance to the ministry to the ministry of European affairs, a less politically charged appointment. Italy’s populist government is in place.

The institutional crisis following Mattarella’s rejection of Savona was unprecedented. It is true that, in the end, the president managed to steer the situation precisely where he wanted: he made the Lega and M5S converge to form a government that is very unlikely to question Italy’s membership of the euro. But at what price? Uncertainty, criticism and factionalism undermined the prestige of the presidency. Financial losses were considerable. Despite his calm image, in the final stages Mattarella was an aggressive negotiator. By calling in Cottarelli, he basically went for a coercive bargaining strategy, to which Di Maio surrendered. But it was a risky decision. If the parties had rejected the last chance to negotiate, the second wave of Italian populism would have been considerably higher than the first. By appointing a former IMF guy to lead the country to new elections, the President would have given the populists’ anti-establishment rhetoric a very appealing target.

But now the government will be forced to take responsibility, and will face the fact that the promises they have made are unrealistic. It is within the mandate of the president to reject any law that is not properly funded, and it would not be a surprise to see Mattarella even some scores in the future.

Despite the general sigh of relief, the overall outcome is a populist and nativist government that is likely to shift one of the biggest European economies closer to the Visegrad group than to a Franco-German axis. Salvini’s fascination for Putin and strong criticism of the Dublin treaty are no secret. Di Maio’s taste for fiscal transfers and expensive pensions reforms are well known. Italy has become a country that needs to be handled with care. All of a sudden, Angela Merkel noticed that Italy could have been left alone to deal with the migration crisis. Marine Le Pen welcomed the new Italian government as a new step in the return of the power of people. This is not good news for the European cause.

The great absentees in this story are the progressives. The PD has steadily lost support since 2014, and lost its leading position after defeat in the constitutional reform referendum in December 2016. They will have to get used to their new role as the opposition, but so far they have proved unable to set forth any convincing narrative alternative to the League and MS5’s nativist one. There is a lack of both detail and vision coming from the left. Italian progressives must try harder.