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Analysis
Italy teeters between farce and tragedy

Italy teeters between farce and tragedy

Populist deputy prime ministers hold key to power

by Antonio Armellini in Rome

Thu 7 Jun 2018

After teetering between farce and tragedy for three months, Italy has a government. For how long and to do what remain to be seen. Many ministers are newcomers. The 'looney factor', especially among members of the Five Star Movement (M5S), has been tempered, but there is a serious lack of understanding of the workings of government, partially offset by a few seasoned technocrats in the cabinet. The new prime minister, Giuseppe Conte, will be hard pressed to exercise the substantial powers the constitution grants him. M5S leader Luigi Di Maio and League leader Matteo Salvini (both deputy prime ministers, for industry and labour, and the interior, respectively) hold the keys to actual power.

Sergio Mattarella, the president of the republic, was vilified but succeeded through negotiating skills honed in the old Christian Democrat tradition to have his way. There was a feeling that Salvini was not planning to form a government but was pining for a snap new election, and had nominated Paolo Savona, a fiercely eurosceptic economist, as finance minister to forestall any agreement.

Di Maio, on the other hand, needed a government, as his position within M5S risked becoming untenable in case of failure. Mattarella patiently waited for the two leaders to try, and fail, to come together. He then played the technocratic card of Carlo Cottarelli, a former director of the International Monetary Fund who had no chance of parliamentary support and whose failure would make elections inevitable.

The expected spike in the spread over German bunds added to the drama. Salvini became worried and Di Maio quickly reversed his stance and joined a government in which the League has the upper hand.

The two winners are populists of a different ilk. The League is nativist, against globalisation, deeply critical of the European Union, sympathetic to Russia and has a record of efficient local government. M5S is a hodgepodge of protest movements spanning left and right. It has changed position many times, including on Europe, and has a limited record of (inadequate) local government.

Salvini is rough around the edges but politically savvy and has proved his mettle during this crisis. Di Maio is untested in power, criticised by his own hard core, and his relationship with both Beppe Grillo, the founder of M5S, and Davide Casaleggio, the owner of the movement's internet platform, remains opaque. They share a commitment to mass repatriation of illegal immigrants and are deeply suspicious of the EU while remaining ambiguous on the euro. League voters want protection against globalisation and fewer taxes, those of M5S want more state subsidies.

The government's spending measures, such as changing the pension laws, renationalising airline Alitalia and introducing a flat tax rate and a universal minimum 'citizens' income', try to address the contradiction. The programme cost more than €100bn, an unsustainable amount given Italy's debt. Implementing the measures would court disaster, but they are at the heart of many election promises. The temptation to let demagoguery prevail over facts will be very strong. Giovanni Tria, the finance minister – a competent if mildly eurosceptic economist – has the hard task of introducing reality into the debate. It is all but clear whether symbolic gestures such as cutting MPs' salaries will pacify an already restive public. Expect the initial course to be rocky.

The same problems apply to the issue of Europe. President Mattarella blocked Savona's appointment, and everyone then rushed to deny any intention to take Italy out of the euro. The result is a political oxymoron: Enzo Moavero Milanesi, a chef de cabinet to former Prime Minister Mario Monti and one of Italy's most committed europhiles, is foreign minister, but Savona stays in the cabinet as minister for Europe.

Salvini has only half-heartedly given up his opposition to the euro. He aims for an approach to immigration in the style of Hungarian Prime Minister Viktor Orbán and will look to Savona to fight his corner. Moavero will need to satisfy the president that the country will toe the Brussels line and keep a co-operative attitude. Support for the EU is diminishing, but at the same time Italians are strongly in favour of the idea of Europe (whatever that may be). It is an open question if Moavero will be able to steer a coherent course.

Will this government last? It has a comfortable majority in the Chamber of Deputies, and a slim one in the Senate, but should have no trouble in getting confirmed in parliament. Traditional alignments have been turned on their head in Italy, the distinction between left and right has lost all meaning and the country has entered uncharted political territory. The inevitable difficulty of translating the more extreme promises into legislation could increase the attraction of a snap election – as an in-or-out referendum on Europe and the meaning of Italian democracy.

The constraints posed by reality have not gone away. Financial markets, apart from last week's flurry, have been largely subdued, but this may not last. It's early days, but the coalition remains fragile and may not survive beyond the May 2019 European elections. After that, almost anything could happen.

Antonio Armellini was Italian Ambassador to India and Nepal from 2004-08. He is a Member of the OMFIF Advisory Board, International Institute for Strategic Studies and Istituto Affari Internazionali.

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