Italian system threatens populist vision

Italy’s anti-establishment Five Star Movement and the far-right League rattled markets this week by discussing a joint agenda that would radically alter the country’s direction on everything from economic policy to migration. 

But as Luigi Di Maio, the Five Star leader, and Matteo Salvini, head of the League, prepared to take power — seen by some investors and EU policymakers as a frightening prospect for the eurozone — the question was whether this vision might quickly be clouded by political infighting, institutional constraints and bureaucratic inertia. 

“The system in Italy was created to make sure that there was a weak government and a very complicated policymaking process — this is the heritage of the fascist regime,” said Wolfango Piccoli, an analyst at Teneo Intelligence in London. “I am not sure it will be any different this time.”

The intricacies of the Italian legislative process have hobbled ambitious political leaders before — most recently Matteo Renzi, the former centre-left prime minister who governed from 2014 to 2016. He frequently blamed the byzantine structure of Italian politics — which includes two branches of parliament with similar powers, an influential presidency and a change-averse public administration — for not being able to fully implement his agenda. 

For Mr Di Maio and Mr Salvini, rivals during the March general election, the first task may be to stick together politically.

Five Star won 32 per cent of the vote at the poll, while the League captured 17 per cent, making Mr Di Maio’s party the senior partner of the coalition in many respects. But Mr Salvini’s League has more experience in government, and has been gaining support since the vote, according to polls, to the point where it is in many ways an equal partner. 

If this delicate balance is upset as they press ahead with tough decisions on economic policies — like the scale of their tax cut or guaranteed income plans, or their approach to the EU — the two parties could suffer defections, imperilling their slim majority in parliament. 

The bedrock of their budding alliance is a German-style “contract for a government of change” that the two leaders were preparing to sign on Thursday. It includes 39 pages of common policies and is intended to keep the former rivals aligned.

The first chapter establishes a “reconciliation committee” that includes the prime minister and the two party leaders and is intended to resolve disputes and set new policy if it is not addressed in the contract. This drew criticism for being an unconstitutional shadow governing structure. 

“This is a parallel body, it’s like the ‘Grand Council of Fascism’,” said Graziano Delrio, a senior lawmaker for the ruling Democratic party. “They have a worrying constitutional culture.” 

External actors could also weigh on the nascent dual-headed government, perhaps to an extent that Italy has not seen in recent decades.

On the Five Star side, interventions by Beppe Grillo, the comedian who founded the party in 2009, and Davide Casaleggio, who runs the company’s online internet platform, could influence the decisions of party officials in government. On the League side, Silvio Berlusconi, the former centre-right prime minister, who was consulted by Mr Salvini this week and remains an important ally, will continue to try to affect the government’s direction — even though he would be in opposition. 

Mr Salvini and Mr Di Maio may also face repeated conflicts with Sergio Mattarella, Italy’s 76-year-old president, who has the authority to refuse to sign legislation that he believes does not respect the constitution. This could include laws deemed to be in violation of an international treaty or that defy a requirement for budgetary balance in the eurozone’s third-largest economy.

The parliament has the power to overturn such presidential vetoes, but a series of stand-offs with the Quirinale, seat of the presidency, could strain the ties binding Mr Salvini and Mr Di Maio as well as delaying their agenda.

“In theory, the president could reject a budget that explicitly breaches EU deficit targets, although this would trigger an unprecedented institutional crisis,” Federico Santi, an analyst at Eurasia Group, said in a note.

As they consider all these obstacles, Mr Di Maio and Mr Salvini know that the time for productive co-operation may be short. European elections are due in 12 months’ time, when Five Star and the League will compete as rivals. Each party may pay a hefty price if they are dismayed by their first year in office.

Some analysts are not so sure — seeing that Italy’s expectations of quick political change will be held firmly in check by past experience.

“Italians can be very cynical and are not necessarily expecting them to deliver on everything immediately,” says Mr Piccoli.