Italy: Our thoughts on the new government

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Last night, almost three months after the Italian general election, the President, Sergio Mattarella, appointed a new political government supported by the Five Star Movement and the League. The government’s mandate comes into effect later today and will be led by Giuseppe Conte as Prime Minister, while the leaders of the two abovementioned parties (Di Maio and Salvini) will act as Deputy Prime Ministers and be the real drivers of this government.

The new government

It took considerable efforts to break the impasse created last week. The refusal of President Mattarella’s to appoint a Minister of Finance and Economy with sceptical views towards the Eurozone (Prof. Paolo Savona) initially seemed to canter Italy towards new elections. However, the majority of parties eventually compromised to appoint Prof. Savona as Minister of European Affairs. The new government formation addresses the President’s concerns and aims to appease those that were sceptical about Di Maio and Salvini’s lack of government experience. For example, Enzo Moavero Milanesi – a former high-ranking EU official and Minister of European Affairs during both Monti’s and Letta’s governments – has been appointed as Minister of Foreign Affairs; and Minister of Economy Giovanni Tria’s appointment is intended to reassure the markets.

One could, therefore, say that this is less of a “change government” than some expected, but that the European Affairs portfolio is newly politicised.

How long can it last?

Last night’s decisions have reassured the markets after a week of heavy turbulence. However, it remains to be seen how the markets will react to any monetary and fiscal policy actions taken by this government.

The majority supporting the government may stand firmer than commentators initially expected. All the same, the common ground uniting the Five Star Movement and the League is mainly their critical approach to Europe.  Multiple differences on domestic or foreign policy could emerge over time and create tensions, if not political crisis.

Italian politics moving forward

It is worth noting that after the elections in March, according to the polls, support for the League increased dramatically (from 17% to around 26%), while support for other political parties decreased. The Democratic Party and Forza Italia appear especially weak and unable to provide proper opposition to the new government. The formation of a new government and the fact that new elections are not coming up (at least in theory), gives non-governing parties the chance to recalibrate: important changes in leadership are expected, and the creation of new political parties is not out of the question. Close attention will need to be paid to such developments in view of European Elections coming up in 2019: this will be the first important electoral test for the new government.

The new government and the EU

In the last few days, various leaders from the parties in government reassured the public that they don’t intend to bring Italy out of the Eurozone or the European Union.  However, they also stressed that EU monetary and economic policies need to change, allowing for much greater flexibility in relation to budget spending. These discussions will stay on the agenda for the next period and could create further tensions and provide momentum for euro sceptical parties across Europe.

When it comes to Italy’s participation to the European Union and its policies, we can expect the new government to push for a reduction of the competences of the EU (a crucial consideration when it comes to the current debate on the future of the EU); to potentially oppose trade agreements such as TTIP, TISA or the MES for China, and to re-negotiate the Italian contribution to the next Multiannual Financial Framework. Moreover, in their joint programme, the Five Star Movement and the League mentioned the need to improve the involvement of citizens in the EU policy-making process and strengthen the role and the powers of the European Parliament.

Written by Nicola Scocchi, Andrea Corazza and Lara Natale
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