Hot season: attempt to create a populist government ruined in Italy

Italy has been in the headlines over the last few weeks. There is nothing strange that the fourth biggest economy of Europe is facing a political crisis. Crises are not something new in Italy: since the end of WWII, that country has changed dozens of regimes. But this time, it was close to getting in the hands of a populist government, a government that would have raised expenses and cut taxes were it not for the president.

They in Brussels are well aware what a populist government is: over the last years, they have been regularly criticized by such governments in Poland and Hungary.

Poland and Hungary have been their headache of late but that headache could have become even stronger, had a similar government come into power in Italy – especially as the Polish Law and Justice and the Hungarian Fidesz are not even a patch on the Italian Five Star Movement and Lega. So, should the Italian populist manage to overthrow the president and to come into power, Europe will face hard times…

Familiar scenario

The events in Italy developed according to a familiar scenario: the Mar 4 parliamentary elections gave no majority to any of the parties. The first in the race was a right-wing coalition comprising Silvio Berlusconi’s Forza Italia and Matteo Salvini’s Lega. The second was the left-wing Five Star Movement. The third was former Prime Minister Matteo Renzi and his Democrats.

During the following two months, those forces tried hard to form a coalition that would satisfy the EU but in vain. The unyielding Democrats failed to come to terms with either the rights or the populists and were forced to go into deep opposition. It seemed that Italy would face mid-term elections as the Five Star Movement with their young charismatic leader, Luigi Di Maio, refused to form any alliances with the mainstream parties.

But all of a sudden, Di Maio said that he was ready to negotiate with some forces. He did not mean Forza Italia, as the populists consider Berlusconi as a synonym of corruption, but the far-right Lega.

In late Mar, the theoretical alliance of the Five Star Movement and Lega passed the first test – the election of the speakers of both houses of the Italian parliament. The EU got tight but was not in panic as it knew that both Salvini and Di Maio were seeking the office of Prime Minister and would not therefore be able to overcome their rivalry. But when Sergio Mattarella said that Salvinia and Di Maio had just one chance left to come out of the deadlock, the two gave up their ambitions and first adopted a program for the new Cabinet and then nominated a candidate for prime minister – unknown politician but well-known lawyer, 53-year-old Giuseppe Conti. By Sunday, Conti had formed a new Cabinet, which according to experts, had all chances to be approved by the president and the parliament. But Mattarella spoiled the populists’ game.

Bags of problems

While authorizing Conti to form a government, Mattarella, who was a judge of Italy’s Supreme Court in the past, said that the new government would have to solve chronical economic problems, to ensure financial stability, to regain the market’s confidence and to observe budgetary rules. Ansa quotes an official who was present at the meeting as saying that Conti welcomed Mattarella’s tasks and said: “I fully realize the need to confirm Italy’s status in Europe.”

He noted that the program of his government had been drafted by Di Maio and Salvini and that his first step would be negotiations with the EU on new EU budget, new migration rules and final efforts to create the European Banking Union.

Some of Conti’s statements were supposed to calm down the EU and its markets. But they in Brussels will hardly calm down as the program of Di Maio and Salvini contains the key requirements of the Five Star Movement and Lega – to enlarge expenses and to cut taxes – something that is contrary to the EU’s fiscal rules.

Regardless of politics, even if Conti’s government is approved, he will face hard times as the Italian economy has been almost stagnant over the last two decades. This year, it is expected to record the lowest growth in the Eurozone. In 2016, it grew by just 0.9%, in 2017 by 1.5%. This year, expects predict the same growth, in 2019 1.1% growth.

Besides, Conti has almost no experience in big politics and will have to be as shrewd as he can to restrain the personal and political rivalry of Salvini and Di Maio.

That rivalry is the EU’s last hope: for the Europeans this is a chance that the fragile political equilibrium in Italy will collapse and that there will be mid-term elections, where the winners will be either the Democrats or right-of-center Berlusconi.

Conti is a member of the Five Star Movement. The Italian body politic first heard of him a few days before the elections, when Di Maio mentioned him as a candidate for Justice Minister. Later it became known that Conti had helped Di Maio to formulate his electoral theses concerning the judiciary.

German cage instead of armored vehicles

On Sunday, Conti submitted a list of his ministers to Mattarella.

Most of them were from the Five Star Movement and Lega, in other words, Euroskeptics.

The biggest stumbling stone for Mattarella was the candidate for Economy and Finance Minister – 81-year-old Paolo Savona – who is known for his Euroskepticism and anti-Euro moods.

A couple of decades ago, Savona was one of the authors of the Maastricht Agreement but quite recently he appeared with a book where he called Euro a “German cage.”

Conti’s nominee for Foreign Minister was 63-year-old Giampiero Massolo, whom former Italian President Francesco Cossiga called a “Fascist Communist.” By the way, Massolo speaks Russian and is benevolent towards Russia.

But the refusal of Di Maio and Salvini to be prime minister does not mean that they will be in shadow. Both were planning to get offices in the new cabinet: the posts of labor minister and interior minister, respectively.

As labor minister, Di Maio was going to reduce unemployment, which was as high as 11.3% last year and is expected to stay above 10% in 2019, while for Salvini with his attitude towards migration, the post of interior minister was a perfect choice. Migration is one of the few common grounds between the Five Star Movement and Lega. Before the elections, they promised to expel as many as half a million immigrants from Italy. If they do this, they will provoke a conflict with the EU and that conflict will be much more serious than the one provoked by the refusal of Hungary and Poland to receive refugees from Africa and Asia.

Even though most of the ministerial offices are expected to go to the Five Star Movement, the program of the new cabinet is full of Lega’s theses. Today Salvini is very popular. Last week, his party enjoyed a jump in popularity from to 25% from 17% in Mar. The rating of the Five Star Movement has not changed and is still 32%.

Brussels will face hard times

They in Brussels were on pinpoints throughout last week. They knew that even the most committed and radical politicians break their promises sometimes and often fail the test of power. There have been such precedents in Italy.

No matter what the Italian populists said before the elections, they may well change their views once they come into power. It is the 21st century and everybody, including North Korea, realize that they cannot live in full isolation. Great Britain’s exit from the EU has shown what difficulties a European state may face if it breaks away from the Eurozone. It’s more trouble than it is worthy.

So, we tend to believe the assurances of the Five Star Movement and Lega that they are not going to exit the Eurozone.

As regards their plans to enlarge expenses and to cut taxes, if they carry them out, Italy’s huge debt – 130% of GDP – may become even huger. For the time being, it is twice bigger than allowed in the EU and is too big for the EU to cover it with loans as was the case with Greece, Portugal or Ireland. The consequences of this populist step may cover the whole of Europe as waves caused by a stone thrown into a pool.

The European Commission and Italy may clash this autumn, when the Italians will have to adopt their budget. For the moment, they comply with the rule saying that a budget deficit should not exceed 3% of GDP. Last year, it was 2.3% but nobody knows how much it will grow should the Five Star Movement and Lega fulfill their financial promises.

We will need some time to see the Italian populists’ actual attitude towards the EU.

During the EU summit in Sofia, French President Emmanuel Macron said that the ruling coalition in Italy was a union of paradoxical and heterogeneous forces. His reluctance to see a populist government in Italy is natural as it would have put an end to his ambitious program to reform the Eurozone and the EU as a whole.

“The new Italian government will give Germany every excuse not to do what Macron would like and it will destabilize the markets,” said Charles Grant, director of the Center for European Reform, a research institution. “It will increase the risk of another Eurozone banking crisis, not reduce it.”

Last week French Finance Minister Bruno Le Maire urged Italy to respect the EU’s rules and not to endanger Euro. He meant the Italian populists’ plans to enlarge Italy’s expenses by 126bn euros.

“Italians must understand that the future of Italy is in Europe and nowhere else, but there are rules to respect,” Le Maire said in an interview on Europe 1 radio.

As regards the Kremlin, it is not very critical about the situation in Italy. Both the Five Star Movement and Lega are benevolent towards Russia and insist that the EU should lift its sanctions against our country.

The only consolation for the European hawks is that their coalition program no longer contains the call for immediate lifting of the anti-Russian sanctions. On the other hand, it contains a point saying that Russia is not a military threat for Italy and Europe but is their potential partner.

The Italians do not want to be the slaves of the Germans and the French.

But Mattarella has spoiled the game of the populists and the nationalists. The EU must raise a monument in his honor as he has saved Europe or at least has given them time to prepare for a new fight against the Italian populists should they come into power.

On May 28, due to its president, Italy entered the 84th day of the longest-ever political crisis. It was almost over when Mattarella refueled it by refusing to approve Giuseppe Conti’s Cabinet. Conti said that he was unable to form a government under such circumstances. In his turn, Mattarella is going to meet with former Interior Ministry official Carlo Cottarelli, whom he is expected to ask to form an interim government and to pave the way for mid-term elections.

And Mattarella is deaf to Savona’s assurances that he will fully comply with the Maastricht and Lisbon agreements and do his best to reduce Italy’s debt and to develop its economy.

“Uncertainty over Italy's political situation has rattled financial markets, driving up the country's borrowing costs and this "increases our public debt and reduces the funds available for public spending," Mattarella said.

On the other hand, the Italian President is still ready to support a government led by the Five Star Movement and Lega.

His decision has infuriated both the rights and the lefts, who have called him a traitor and insist on his impeachment. Berlusconi has stood up for Mattarella as he is well aware that mid-term elections are one more chance for him.

Salvini is of the opposite opinion: “Italy is not a colony, we are not slaves of Germans or French…”

Di Maio has supported his ally: “Mattarella’s decision was inconceivable. The truth is that they don’t want Five Stars to be in the government. I am very angry, but I promise that this is not the end…”

And this is actually not the end. Very soon, we may witness one more big surprise. The Italian populists have declared a war against their president. They want him to resign and hope to win new elections.

Sergey Manukov