Italy's Election Could Change Everything

PD party leader Matteo Renzi looks on during a news conference at the foreign press association in Rome, Italy, February 13, 2018. REUTERS/Tony Gentile

If Euroskeptic parties win a majority, which is a possibility, and somehow cobble together a coalition, Italy could be looking at a referendum on whether to leave the eurozone.

Italians go the polls on March 4 to elect a new parliament. Based on opinion polls, it is likely that the outgoing coalition, led by the center-left Democratic Party (PD), will not be returning to office. Although PD-led governments have shrunk the deficit, stabilized the banking system, brought back economic growth and chopped away at the country’s high structural unemployment, it appears that Italian voters are ready for a change. If Euroskeptic parties win a majority, which is a possibility, and somehow cobble together a coalition, Italy could be looking at a referendum on whether to leave the eurozone, a development that would greatly complicate the financing of the country’s public sector debt, which is in excess of €2.3 trillion, equal to over 132 percent of GDP. Such a development would no doubt roil European as well as global markets.

The major parties competing in the March 2018 election are the PD, the Five Star Movement (M5S), Northern League, Forza Italia, Free and Equal, and Brothers of Italy. The key election issues are immigration, a generational divide in the workforce between the young who are shunted into part-time and temporary work and an older generation with a lock on full-time employment and pensions, and overall frustration with what many see as a corrupt and badly behaved political class. Immigration probably tops the list, partly due to a highly publicized shooting that killed five migrants in early February. Moreover, Italy is the first stop for many refugees from Africa; an estimated six hundred thousand have come to the country since 2014.

The M5S is leading in the polls, and its prime ministerial candidate, the thirty-one-year-old Luigi Di Maio, has run an energetic campaign, but his party has been tagged by a number of scandals and is hurt by its lack of experience (it has never formed a national government). Yet the M5S maintains the support of just under 30 percent of potential voters and draws support from throughout the country. It has also been gaining voter support in the country’s south and young people frustrated with by economic system they see stacked against them. The party is anti-EU, antiestablishment, anti-immigrant and anti-austerity. In the past it has favored a referendum on membership in the eurozone, more direct democracy and greater social spending.

The M5S has also indicated that it is interested in doing something about Italy’s outsized public-sector debt, which hinders faster growth and diverts funds from badly needed infrastructure and educational upgrades to debt repayment. The debt has also meant years of tight central-government finances, something that many Italian voters resent and for which they blame the EU and German governments. Lorenzo Fioramonti, an aide to Di Maio, recently stated that the “time is right” to consider restructuring debt in Italy and elsewhere. While this may sound good to domestic audiences, it has raised alarm bells with Italy’s creditors, who are nervously watching the election. Fioramonti could emerge as a minister in a M5S-led government.

Another important element concerning the M5S is that its founder, Beppe Grillo, has long maintained that his party should only enter government with an absolute majority, enabling it to change the system—at which point it could then disband, having succeeded in its mission. Under Di Maio there is little talk of getting an absolute majority; rather the M5S is running to win the largest number of seats and place itself at the head of a coalition government.

The M5S game plan, however, may be upended by eighty-one-year-old Silvio Berlusconi, the former prime minister and leader of Forza Italia. While Forza Italia is polling under 15 percent with possible voters, Berlusconi is thought to be able to pull together a right-wing coalition with the Northern League (populist and based in the north) and Brothers of Italy (a conservative nationalist party). Together with some smaller parties, a center-right bloc commands 34.7 percent in opinion polls, making it the largest force, though still short of an outright majority once the votes are counted.

Both the Northern League and Brothers of Italy lean Euroskeptic, are opposed to immigration and would prefer to see less austerity in government finances. Although Berlusconi is banned from public office following a conviction for tax fraud, he is one of the major forces in the election and could well end up being the ultimate kingmaker.

The remaining two major parties are the PD and Free and Equal. Both are pro-EU. The PD is led by Matteo Renzi, the former prime minister (2014–16) and responsible for making many of the difficult economic reforms that stimulated economic expansion, reduced unemployment and helped stabilize the banking system. The PD and allied parties form around 27 percent of the potential vote. Free and Equal sits at a little over 5 percent in the polls.

What hurts the PD is that Renzi was seen as having abandoned many of the ideals of the PD’s leftist tradition, which resulted in much of the party’s left wing leaving the PD to form Free and Equal. The PD hopes to gain votes from undecided voters, who may come back to their party based on fear of what the other parties could do in power.

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