For the EU and the Eurozone, the recent political developments in Italy are not good news. The ‘zombie’ government status of the UK over the summer is now also shared by Italy, one of the ‘big three’ EU economies. Mario Draghi, an economist and career diplomat, who was asked by President Mattarella to become its prime minister in February 2021, has resigned. Elections to the Senate and Council of Deputies will be held on 25 September.
Draghi will be sorely missed, as he was a close ally of President Macron, who despite securing another five-year term in recent elections, no longer commands a majority in the Assemblée Nationale in Paris. Germany, the other major EU power, faces crippling energy shortages this winter because of the withdrawal of Russian gas supplies, while the whole continent faces similar challenges.
The reason for Draghi’s departure was that an important partner in the national unity coalition which he led, the populist left of centre Five Star movement (M5S), refused to support the government in a parliamentary vote on support for low-income groups, on the grounds that it did not go far enough. Draghi had provided stability, lacking in a country which has seen 20 changes of government since the fall of the Berlin wall. The action by M5S has now opened the door to a coalition led by the far-right nationalist Brothers of Italy (FdI) in a prospective partnership with Silvio Berlusconi’s Forza Italia and Matteo Salvini’s Lega (formerly the Northern League).
From the Brothers of Italy, the first female prime minister?
With these three right-of-centre parties FdI, Lega and Forza Italia committed to a tentative agreement made on 27 July, current polling suggests the group could win over 45 per cent of votes. That would be enough for a functioning majority in a multi-party parliament. FdI is currently polling ahead of Lega and Forza Italia, so their leader Georgia Meloni is likely to become the first female prime minister of Italy. FdI is determinedly far-right, tracing its origins to Italy’s post-war neo-fascist movement, while Lega is solidly nationalist and, like FdI, has Eurosceptic tendencies.
From the EU’s point of view, the resignation of Draghi, a former president of the European Central Bank, could not have come at a worse time, with a war raging on its eastern border. He had firmly supported Ukraine against Russia whereas, since the Russian invasion, Berlusconi and Salvini have performed swift U-turns away from their previous close links to Russia under President Vladimir Putin.
Draghi had focused on an ambitious agenda of reform and investment, negotiated with Brussels to obtain the largest share (potentially up to €200bn) of the EU’s Euro 800bn post-covid recovery fund. The structural reforms which are necessary for Italy to qualify include tax and judicial reforms and strengthening the economy. They are designed to raise long-term growth prospects and ensure the sustainability of Italy’s public debt, now about €2.7tn, or around 162 per cent of its GDP – a potential threat to the stability of the Eurozone. A failure to deliver will threaten the recovery package, and Italy’s ability to sustain its debt commitments, as some bond traders seem to be anticipating. The position will not be helped by the fact that the IMF warned in July that a Russian gas embargo would lead to an economic contraction of more than 5 per cent in Italy, amongst other countries.
Repercussions for other weaker EU countries
Salvini and Meloni have, in the past, been outspoken Eurosceptics. One of the key questions is, therefore, whether the proposed coalition led by FdI would secure Italy’s full share of the EU’s pandemic-recovery programme, or by insisting on changes, fail to grasp this critical opportunity. In a joint policy statement released on 11 August, the parties promised “full adherence to the European integration process” but also raised the prospect of amendments to the reform plan already agreed with the EU by Draghi, on the basis of “changed conditions, needs and priorities”.
If the new government fails to deliver on reforms, the repercussions will go far beyond Italy. The EU post-covid fund is seen as an indicator of scope for further economic integration within the bloc. If it fails in Italy, this will undermine confidence amongst northern European capitals about future support for weaker EU economies.
Right’s rise poses risk to liberal traditions
In terms of domestic policy, stringent measures against migrants are highly likely under a Meloni-led government, with the stream of asylum seekers crossing the Mediterranean a persistent grievance for these parties. Social policies may also see a reversal of many of Italy’s liberal traditions of the last half century. For example, in the region of Le Marche, where they hold power, FdI has impeded access to abortion, challenging pro-abortion policies which have existed since 1978.
While the upcoming elections seem certain to pose trouble for Italy and the EU, all this hinges on the reliability of the glue holding together the three main parties involved. With Silvio Berlusconi now aged 85, in a country with a history of political volatility, the longevity of such a coalition remains to be seen.