EU frets as Italian democracy empowers Eurosceptics

Both parties in what appears to be Italy's emerging coalition government rightly believe the Euro has been good for Germany and bad for Italy. It won't be a supercharged Eurosceptic onslaught, but rather a chipping away at the EU edifice which one day is destined to fall

Salvini_(left)_and_di_maio_will_govern
Salvini (right) and Di Maio will govern Italy
Timwork
Tim Hedges
On 27 March 2018 11:53

As I surmised, the unlikely coming together of Luigi di Maio and Matteo Salvini, the anti-establishment and the centre-right, seems to be on the cards. Salvini said he spoke to his opposite number ‘more often than to my wife’ (mind you, his private life is ‘complicated’).

They found it fairly easy to agree on candidates for speaker in each of the houses of parliament, and this is often regarded as a precursor to a government being formed.

Maria Elisabetta Alberti Casellati is an expensive lawyer who once defended Luciano Pavarotti. She is an old crony of Silvio Berlusconi and whilst not his first choice, the appointment will please him. It was difficult to find someone he liked whom 5-Star could tolerate, most of his pals being perceived as dodgy, to say the least.

No one has anything against Mrs Casellati, who will lead the Senate. She would replace the President of the Republic if he died in office and is the first woman to hold the post.

At the House of Deputies Luigi di Maio proposed Roberto Fico, 43, a bearded Neapolitan. He is an expert on mass communications and helped found the party which at its early stages was based on mass rallies. He is considered a purist, and it came as no surprise when in his acceptance speech he said one of the first things to do was reduce the cost of parliament.

These two will have enormous influence on how any new government operates, deciding on who speaks, what is debated and what is voted on.

A government, it must be stressed, has yet to be formed. They must decide who is the senior party -- Salvini if he can hold his coalition together, di Maio otherwise. Then there are the regional and demographic differences.

Somehow they must resolve the problem that 5-Star has almost a monopoly of the south which needs to be assuaged. There are already stories of people going into Post Offices and saying they had duly elected Mr di Maio, so could they now have their minimum income of €680 a month?

Salvini, by contrast, has a heavy majority in the north (only the middle of the country voted centre-left) which wants a flat tax and less bureaucracy for business.

Against that, the parties are both mildly eurosceptic and believe, correctly, that the single currency has been good for Germany and bad for Italy. They both refuse to be told how much the nation can spend. Lastly, the are both very concerned about immigration.

A deal could be done, given some political will, and President Mattarella will be urging them on for the good of the country. But what should outsiders think? Both parties are revolutionary. Together would they be more so or less?.

Two recent changes to Italy’s economy were the Fornero Law, which provides for the pension age to be extended, as happens in other European countries, and the Jobs Act, introduced by Renzi’s government, which made it easier to hire and fire and has resulted in many more, much needed jobs.

Both parties are pledged to abolish or radically alter these two laws. If they do, and it wasn’t just election grandstanding, the markets will notice. That, coupled with increased proposed spending, Germany’s increasing reluctance to bail out everyone else, and Mario Draghi tapering off the bond purchase scheme which has kept Italian interest rates low, and there may be a run on Italian bonds.

Would Europe ride to the rescue but, as with Berlusconi in 2011, insist on a change of leadership? There is a lot at stake here. Let us hope these two young men are neither impulsive nor frivolous.

Tim Hedges, The Commentator's Italy Correspondent, had a career in corporate finance before moving to Rome where he works as a freelancewriter, novelist, and farmer. You can read more of his articles about Italy here

 

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