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Italy – On The Verge of Breaking With Europe?

Analyses - 13 June 2019

By Marc Lazar

Director of the History Center of Sciences Po

The League of Matteo Salvini seems to be irresistibly rising. It obtained 34.2% of the votes in the European elections (compared to 6% in 2014), took the Piedmont region from the Democratic Party (centre-left) on the same day and, in June, confirmed its momentum by winning a number of municipalities, including cities that symbolize the left such as Forli and Ferrara, and cities in the South. Matteo Salvini has thus strengthened his position as a strongman for the country and in the government.

In this context, he constantly reaffirms his priorities, in particular: the flat tax, the law in favour of regional autonomy (as traditionally claimed by the Northern League and especially by the presidents of the Veneto and Lombardy regions), the adoption of a new "security decree" aimed at further restricting immigration, the clearing of 600 public worksites and the construction’s initiation of the Lyon-Turin high-speed train line. Moreover, while the European Commission denounces the increase in the public deficit and debt and considers an infringement procedure, Matteo Salvini declares with lots of bravado that "a Europe of austerity, precariousness and unemployment is over". He intends to impose his policy.

First, he intends to impose it to the Five Star Movement, which has been going from defeat to defeat in each local, regional and European election. On 26 May, it finished in third place with 17% of the votes against more than 21% in 2014, and with a loss of more than 6 million voters compared to the parliamentary elections of 4 March 2018, where it had came out on top with 32.7% of the votes. The party is now divided on the alliance that led it to govern with the League, which benefits only the League, and on the strategy to be pursued. An electronic consultation unsurprisingly reveals that Luigi Di Maio remains the party’s leader. He plans to change its organization by, for example, structuring it territorially and redesigning its communication. Currently, in fear of early elections that could be highly damaging to him, he prefers to remain in power. As a result, he is forced to accept all of Matteo Salvini's demands. This only accentuates the party’s internal discontent. Unlike the League, the Five Star Movement has an increasingly blurred identity and, in addition, lacks political experience.

The Minister of Economy, Giovanni Tria, the President of the Council, Giuseppe Conte, and the President of the Republic, Sergio Mattarella reject the creation of mini-BOTs and, fundamentally, reaffirm Italy's membership of the European Union and the eurozone.

Matteo Salvini must then sway three key personalities in the executive and institutions: the Minister of Economy, Giovanni Tria, the President of the Council, Giuseppe Conte, and the President of the Republic, Sergio Mattarella. Salvini almost threatens the first two, taking advantage of their weaknesses and of the fact that neither parties nor parliamentarians are ready to follow them. He is more cautious and respectful of the last one, aware of Matarella’s popularity among the public, mainly due to institutional reasons. It is above all in relation to the European Union that a confrontation is at stake.

Salvini wants the government to reject harshly Brussels’ criticism, to impose a right-hand man as European Commissioner and to defend the mini-BOTs, i.e. short-term treasury bills that would establish a kind of parallel currency used to settle the arrears of creditors and suppliers, and behind which the shadow of Italy's exit from the eurozone is emerging. Giuseppe Conte and Giovanni Tria, officiously supported by the President of the Republic, consider that it is up to them and them alone to start negotiations with the Commission without falling into unnecessary and dangerous controversy. They reject the creation of mini-BOTs and, fundamentally, reaffirm Italy's membership of the European Union and the eurozone. They highlight mezzo voce the complexity of the country's economic situation whose growth rate is lower than expected. Indeed, the social expenditure incurred or the measures put forward by Matteo Salvini presuppose finding funding. For example, the flat tax would cost about €30 billion.

It is difficult to predict what will happen in the coming days, weeks or months. Will Matteo Salvini be tempted to trigger a government crisis in order to force the President of the Republic to dissolve the Chamber of Deputies and the Senate? This scenario would need to play out very soon in order for the voters to be summoned by the end of September. And if this were to happen, the League would be in a position of strength, although, it could probably not win on its own.

It should therefore join forces, on its own terms, with Silvio Berlusconi's Forza Italia - a party in bad shape -, and Fratelli d'Italia - the post-fascist party that also progressed in the elections. The Democratic Party is recovering but does not seem to be able to reverse the trend. It is also divided, in particular on the possibility of a possible agreement with the Five Star Movement. The other hypothesis would be for Matteo Salvini to continue to govern with the Five Star Movement in order to further weaken it, to further strengthen its influence in the country and to wait until 2020 to trigger the crisis.

The Democratic Party is recovering but does not seem to be able to reverse the trend. It is also divided, in particular on the possibility of a possible agreement with the Five Star Movement.

In any case, the moment of truth for the League, and more generally for Italy, will be the adoption of the Finance law next fall. How to reconcile contradictory promises? How to finance the planned expenses all the while compensating for any dramatic tax cuts? Last but not least, how to negotiate with the current, and then future, European Commission when Italy finds itself isolated in Europe? The overwhelming majority, if not all, of the Heads of States and governments will condemn the deterioration of Italy's public accounts. As for the populist and sovereigntist elected representatives in the European Parliament, although they are more numerous than in 2014, they remain uninfluential and divided, including on this issue.

The future of Italy is above all an issue for Italians. They are the ones who will have to face in their daily lives the political, economical and social consequences of the action of the parties they elected. However, the fate of Italy, as the third largest economy and second largest industrial power in Europe, concerns also the European Union. Each of us, Europeans, should feel concerned.

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