President Sergio Mattarella dissolved Italy’s parliament yesterday, launching a two-month election campaign that will mark the next big political test of the strength of populism in the EU. The election, expected to be held on March 4, is shaping up to be a three-way contest, with the anti-establishment Five Star Movement currently leading national opinion polls. The ruling centre-left Democratic party (PD) has dipped into second place, ahead of a resurgent centre-right, led by former prime minister Silvio Berlusconi in conjunction with the antieuro Northern League. With each expected to win between a quarter and a third of the vote, the winner may struggle to form a government, possibly plunging the country into a period of protracted uncertainty that could unnerve markets and unsettle foreign governments. “The worst outcome in terms of governance and stability is also the most likely one: a hung parliament,” Wolfango Piccoli, an analyst at Teneo Intelligence in London, wrote in a note. “This would mean that in the aftermath of the vote, Italy enters again a difficult political phase characterised by recurrent noise about snap polls, poor governance and a negative reform outlook.” This year, rightwing nationalist parties joined the government in Austria and won seats in the German Bundestag for the first time in decades. In France, Marine Le Pen of the National Front won through to the final round of the presidential election before being decisively beaten by Emmanuel Macron. Paolo Gentiloni, the PD prime minister, said at a press conference in Rome that Italy was “back on track” after the worst economic crisis in the postwar period. He and his cabinet will remain in charge until the vote. Italy last held a general election in 2013, when the PD eked out a narrow victory. Although Italy has returned to economic growth, the recovery has been sluggish and many Italians have yet to see any tangible improvement. The country has also had to cope with an influx of migrants rescued in the Mediterranean Sea. Both factors have fuelled populist opposition parties. Five Star had previously ruled out any alliances with other parties. However, Luigi Di Maio, its candidate for prime minister, said last week he would be willing to entertain deals with other parties in order to form a government.s the EU tries to regain cohesion after the shock of the UK’s Brexit vote and speed up its economic recovery, the looming Italian election arguably represents the biggest political obstacle. In March, voters in the eurozone’s third-largest economy will head to the polls amid dwindling support for the ruling pro-EU centre-left Democratic party and rising support for the Eurosceptic opposition. The likely scenarios after the vote include a hung parliament, a “grand coalition” or a populist government with a much more confrontational attitude towards Brussels – including plans to question Italy’s membership of the single currency. None of the outcomes heralds greater stability for a country that, from an economic and financial point of view, remains a weak link in the 28-member bloc. The biggest flashpoints in the race are expected to be Italy’s lacklustre economy and the migration crisis, which has brought more than 620,000 asylum seekers to the country from across the Mediterranean Sea in the past four years. But analysts say the political wrangling so far has been focused more on the personalities of the party leaders than the challenges facing the country. “For the moment it’s looking like a very ugly and chaotic campaign,” says Giovanni Orsina, a professor of political science at Luiss University in Rome. “It’s concentrated on personal attacks, provocations and jokes that have nothing to do with real platforms.” Italy is in better shape than at the last national poll five years ago, when it was still deep in recession and financial difficulties. Economic growth this year is expected to be about 1.5 per cent, its best performance since before the eurozone financial crisis, while bond yields – and therefore government borrowing costs – have fallen significantly from the depths of the crisis. Paolo Gentiloni, who was seen as a stopgap prime minister when he took over a year ago, has quietly gained public approval. Yet Italy still trails the economic performance of the rest of the eurozone. In particular, it remains more vulnerable to financial shocks because of its high levels of debt and the weakness of its banking system, which is burdened with a relatively high share of bad loans compared with other eurozone countries. Many Italians are still struggling to feel any benefits from the recovery, with the unemployment rate at 11.1 per cent – higher than the EU average – and youth unemployment at 34.7 per cent. The main political leaders vying for votes are Matteo Renzi, the PD leader who served as prime minister for three years until the defeat of his constitutional reforms last December; Luigi Di Maio, the Five Star Movement’s candidate for prime minister; Silvio Berlusconi, who is mounting a comeback from sex scandals and a tax fraud conviction; and Matteo Salvini, the leader of the Northern League, with a strident message against the euro and immigrants. Given the expectation of a muddied outcome from the poll, analysts and officials in Rome say the next government is more likely to be led by a compromise candidate: perhaps Mr Gentiloni again if the PD performs strongly enough. If the centre-right emerges in a stronger position, some point to Antonio Tajani, the president of the European Parliament, as a potential prime minister. He is a close ally of Mr Berlusconi and Angela Merkel, the German chancellor. The most disruptive outcome would be a coalition between the country’s anti-euro forces, with Five Star striking a deal with the Northern League and Brothers of Italy. All three have questioned Italy’s membership of the single currency, to different degrees, promised to tilt Italy’s foreign policy more towards Moscow-friendly positions and opposed free trade deals. Mr Di Maio has said a referendum on leaving the euro would be only a “last resort” if Rome could not change the EU’s economic policies – essentially looser budget rules. But he said that as things stood, he would vote to leave the euro. Mr Renzi has said an Italian threat to leave the euro would amount to “folly”, but it is unclear whether he can or will mount the kind of unabashedly pro-EU campaign that propelled Emmanuel Macron to victory in the French presidential race. “The anti-Europeans don’t have the courage to take staunchly anti-euro positions because they know it scares people, but the pro-EU politicians don’t want to take openly pro-euro positions either because they known Italians don’t want to hear them,” Mr Orsina says. Runners and riders Contest likely to pit old hands against populist upstarts Luigi Di Maio Five Star Movement Mr Di Maio, 31, is the prime ministerial candidate for the antiestablishment Five Star Movement, which leads polls with the support of about 28 per cent of Italians. Mr Di Maio, who grew up in an industrial town near Naples, quickly rose through the political ranks. He made his name within Five Star after being elected to parliament in 2013 and becoming vice-president of the Chamber of Deputies. Mr Di Maio is considered a moderate within Five Star. Pietro Grasso Free and Equal Mr Grasso, 72, the president of the Italian Senate, heads the leftwing Free and Equal party. A former anti-Mafia magistrate from Sicily, Mr Grasso is part of a group of defectors from Mr Renzi’s PD who have vowed to run separately in the election, arguing that the Italian left cannot be revitalised while Mr Renzi is still around. Free and Equal is polling at about 6.5 per cent. Matteo Renzi Democratic party Mr Renzi, 42, leads the ruling centre-left Democratic party. After suffering a heavy defeat in a referendum on constitutional reforms a year ago, he resigned as prime minister. This year the former mayor of Florence has attempted a comeback, winning re-election to the helm of the PD. But his second act does not seem to be bearing much fruit: leftwing dissidents split from the party and the PD’s poll numbers have fallen to about 25 per cent, the lowest point of his tenure. Giorgia Meloni Brothers of Italy Ms Meloni, 40, leader of the farright Brothers of Italy party, could emerge as a vital figure, since she could possibly form a government with either Mr Berlusconi’s centre-right coalition or a Eurosceptic alliance led by Five Star. Ms Meloni, who is from Rome and ran for mayor there last year, has attacked the EU’s economic and migration policies. Her party is polling at about 5 per cent. Silvio Berlusconi Forza Italia Mr Berlusconi, 81, is back after years in the political wilderness following his ousting as prime minister amid sex scandals at the height of the eurozone debt crisis in 2011. His centre-right Forza Italia party is polling at about 16 per cent, which would put it on track to score a worse result than at any point in recent memory. But Mr Berlusconi could still be a key player in the formation of the next government, presenting himself as a reassuring figure at a difficult time. Matteo Salvini Northern League Mr Salvini, 44, took over as leader of the Northern League in 2013 when it was barely registering in national polls. He switched the focus to fiscal autonomy, and even secession, for the prosperous North and made it a nationalist, far-right party. Its main messages are that Italy should ditch the euro and stop what it labels the “invasion” of migrants. The Northern League is polling at about 14 per cent and will have to forge an alliance with Mr Berlusconi to be competitive.
Financial Times – JAMES POLITI – ROME – 29/12/2017 pg. 1.3.