Italian election’s challenge to the European Union

Italian election’s challenge to the European Union

On the 4th of March 2018 new elections are going to take place in Italy. This will be one of the most important political events for the European Union this year. As 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. According to the last polls, in fact, one months before election the most likely scenario include a hung parliament in which none of the coalitions and political parties is going to reach the 40% of votes, a number that would entitled for extra seats and ensure an absolute majority. The closest coalition to that number is the center-right bloc formed of ex-Prime Minister Silvio Berlusconi‘s Forza Italia, the more right-wing Northern League party led by Matteo Salvini, and the Brothers of Italy, a nationalist party. These three together are polling around 37 percent of the votes. The other two major political groupings, former Prime Minister Matteo Renzi’s center left and the anti-establishment 5Star Movement, are also not expected to get enough votes to form a government. This article aims to analyze some of the possible threats and challanges posed by the Italian elections.

Italy’s economy is the third-largest in the eurozone. It’s also one of the slowest growing and most indebted in the currency union. With public debt at roughly 130 percent of GDP, Italy is second only to Greece, at 180 percent. What makes the Italian situation worrying is sheer scale. As of October, according to the Bank of Italy, the government owed some €2.3 trillion. That’s roughly €35,000for each Italian, newborns included. By comparison, the total Greek government debt is €320 billion, about €29,000 per citizen. Italy’s public debt “is a source of common concern for the euro area” the European Commission wrote in its most recent assessment, in November. Brussels may be worried, but Rome has taken a decisively cavalier approach. Not only has no party put forward a proposal to cut the debt, the election has become a competition over who can boost it the most. Various factions have proposed increased spending of up to €200 billion, nearly 12 percent of GDP. An increasing in public spending that if implemented could have bad results for a fragile economy trying to recover.

Another hot topic is the one dealing with migration. The number of migrants landing in Italy dropped by about 35 percent last year: from 181,000 in 2016 to 120,000 in 2017. That’s thanks at least in part to the controversial efforts of Interior Minister Marco Minniti, whose strategy of striking deals with official and unofficial authorities in Libya has come under fierce criticism from human rights advocates. EU officials have welcomed the drop in new arrivals but worry that the strategy might not hold up in the long term, given the chaotic situation in the North African country. The 2015 migration crisis rocked German and Austrian politics, pushing voters toward the far-right in last year’s election and the same could happen in Italy this year by favoring the racist approach of the Northern league. Furthermore, officials in Brussels fret that a new peak in arrivals this year could have a similar effect in the 2019 European Parliament election. Italy’s “strategy has to last until the elections,” said a worried senior EU official.

The polls don’t look good for supporters of the European Union. The largest single vote-winning party in the election is expected to be the Euroskeptic 5Star Movement, which has called for a referendum on Italy’s membership in the eurozone. However, their support is likely to be surpassed by Berlusconi’s right-wing coalition, but few in Brussels will take comfort. The former prime minister’s largest partner is the far-right Northern League, another party that has built its rise on Euroskepticism. Despite the Euroskeptic rhetoric so many Italian parties have adopted, an “Italexit” from the eurozone is unlikely for now. For one thing, holding a referendum on eurozone membership would require changes to the Italian Constitution that the next parliament will probably struggle to make, based on current opinion polls suggesting no party will win enough of the vote to govern alone. Coalition talks could drag on for months after the election and could lead to a new vote if lawmakers fail to appoint a government. For another, none of the parties flirting with the idea of leaving the eurozone has presented a concrete plan to do so. Most Italians, moreover, oppose leaving the currency area. Though many voters dislike the eurozone, they also understand the risks entailed in leaving it. For this reason, parties have softened their positions regarding the EU in recent days. On the 9th of January Luigi di Maio, political leader of 5stars movement declared: “I believe it is no longer the right moment for Italy to leave the Euro”. On the same day Silvio Berlusconi that tweeted his eurosceptic ally Matteo Salvini, leader of the far-right Northern League, understood that leaving the euro would be “technically impossible and unsustainable for the Italian economy”.

Withdrawing from the eurozone seems not to be a priority for the parties competing in Italy’s general election. Instead, their criticism of the euro is meant to ignite nationalism and woo the large portion of the electorate that is dissatisfied with the political and economic status quo in Italy. It is also meant as a bargaining chip that the parties can use to try to accomplish their true goal: revising the European Union’s fiscal rules. Most Italian parties, including those that are on board with European integration, see the bloc’s rules on deficit and debt as a legal straitjacket preventing Italy from introducing growth-oriented policies. They are particularly critical of the Fiscal Compact Treaty, an agreement that introduced stricter controls on EU members’ fiscal policies, including the requirement to keep a balanced budget. Italy signed the treaty at the height of a financial crisis in 2012 under significant pressure from Germany. Although the European Union has been flexible in enforcing the treaty, Italian politicians are skeptical of a legal framework that reduces their government’s room to maneuver on fiscal policies. The external constraints that many proponents of eurozone membership argued would help discipline Italian leaders two decades ago are now a nuisance for Italy’s politicians.

With opinion polls split three ways, the recently approved electoral system looks unlikely to produce a clear-cut winner in the election. Any government in which eurosceptics have a substantial influence could have unpredictable consequences on the future of European integration and hold back the process of reforming the EU, moving away from the Franco-German plan for deepening the European integration. Furthermore, in about six weeks’ time, two of Europe’s largest economies are likely to have no-one in charge, German coalition talks hitting a stumbling block of their own and unlikely to reach a conclusion before Easter. This would damage the European Union slowing down the reform process which the Union need to be discuss and adopt in 2018.

By: Flavio Previtali