Italy first

Populist win in Italy has Germany worried, though not panicking

A demonstrator holds flags ahead of a speech by Britain’s Prime Minister Theresa May in Florence
Soon to be a rare sight. Source: Reuters

Who will govern Italy after Sunday’s parliamentary election is anybody’s guess, but one thing is clear: The outcome of the vote is a blow for Europe. The outgoing center-left government was swept aside as two anti-EU parties emerged as the winners of the day. Between them, they won half of all the ballots cast.

After voters endorsed parties that support “Italy first,” Rome looks set to turn away from Europe. But despite initial disappointment in Berlin after the first forecasts emerged, no-one panicked. “I am not too worried,” said Frank Baasner, an expert in Italian politics and a professor at Mannheim University. “When reality bites, they will come round,” he told Handelsblatt Global.

One-third of all Italians voted for the Five-Star Movement, a left-leaning, anti-establishment party whose core demands include introducing a universal basic income of €780 per month, plus a minimum wage, and lowering retirement age. While those pledges are not outlandish, they put the party on collision course with Brussels since they would send Rome’s ballooning public debt to unimagined levels.

The third-biggest party is the far-right League Party, which campaigned on a xenophobic platform and vows to take the euro zone’s third-biggest economy out of the single currency area “one second” after they enter government. “Italians decide for Italians,” said a jubilant Matteo Salvini, the League Party leader on Monday. “Not Berlin, not Paris, not Brussels.” The party made also promised to significantly cut taxes and increase benefits.

A former fringe movement previously known as the Northern League that set out by pushing for the independence of Italy’s wealthy north, the League got 17.5 percent of the votes. But the party punches above its weight thanks to a deal with former prime minister Silvio Berlusconi’s conservative party and two other far-right parties. Taken all together, the right-wing alliance came first on Sunday with a 37-percent share of the vote. (See chart)

05 p07 Italy pariamentary vote-01

Either of these parties entering government would be a headache for Europe. This would mean more conflict in the euro zone just as lawmakers seek ways to reform the single currency. Italy already has one of the highest levels of public debt in the EU; at 132 percent of GDP, it is second only to Greece. That gives the country little leeway to increase spending without violating EU debt regulations. This scenario would be “politically toxic,” said Daniel Gros, who leads the CEPS, a politics think-tank in Brussels.

“I never believed in reforms in Italy,” Mr. Gros told Handelsblatt. “After the election result, however, we may even see a few steps backwards.”

Both Mr. Salvini and Luigi Di Maio, the leader of the Five-Star Movement, have said they want to become Italy’s next prime minister. But neither has a majority, so they will need to enter some form of coalition. Considering how far apart they are from one another, as well as from the centrist parties, this could take time.

Wahlkampf in Italien
Turning hard left. The founder of the Five-Star Movement, Beppe Grillo (left) and top candidate Luigi Di Maio are in a mood to celebrate. Source: DPA

Italy is Germany’s sixth-biggest trade partner and, despite years of economic stagnation, one of the largest economies in the euro zone. “For the German economy, it is of great importance whether Italy can form a stable government and continue on its path of reform,” said Martin Wansleben, the head of Germany’s international chamber of commerce on Monday.

Mr. Baasner, the university professor, is not worried about the months of political limbo that may lie ahead, saying, “Italy has been there, done that already.” He adds that if coalition talks were to fail, Italian President Sergio Mattarella, who like his German counterpart does not hold executive power, could appoint a technocratic prime minister. The head of state will then task the appointed premier with forming a government. This has been done in the past, Mr. Baasner pointed out.

What concerns him more is the rise of euro-skepticism in Italy, a founding member of the European Union. “Up till now, Italy was one of the larger pro-EU countries.” This is now in doubt. Berlin and Paris had been counting on Rome in efforts to re-energize the bloc amid Brexit and the rise of populism in Eastern Europe. French President Emmanuel Macron, who was elected last year on a pro-EU agenda, has been advocating for core countries to push for more integration. “For now, Italy is out,” Mr. Baasner said.

As for the tough talks needed to make the 19-country euro zone more crisis-proof, Mr. Gros believes it will be harder to achieve anything now. “It’s not enough if Germany and France make plans. Italy needs to play along and that’s become doubtful after this election.”

Jean-Michel Hauteville is an editor for Handelsblatt Global. Ruth Berschens, a Handelsblatt correspondent in Brussels, also contributed to this article. To contact the author:

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