TheEconomistAugust 24th 2019 191I
tseemsattimes that Italy’s role is to ter-
rify the euro zone’s other member states.
In 2011 the refusal of its then prime minis-
ter, Silvio Berlusconi, to tackle the euro cri-
sis drove the single currency to the brink of
collapse. Since then the country has had six
governments and as many market-spook-
ing crises. Its latest government fell apart
on August 20th, when Giuseppe Conte re-
signed as prime minister, ending a rickety
14-month coalition between two populist,
Eurosceptic parties: the anti-establish-
ment Five Star Movement (m 5 s) and the na-
tivist Northern League. The previous week
Matteo Salvini, the League’s leader, had
withdrawn confidence in the government.
He wants the top job for himself. How
alarmed should Italy’s partners be?
Not very, thought investors. The follow-
ing day, as President Sergio Mattarella be-
gan consulting party leaders on the way
forward, the yield gap between Italian and
German government bonds (an indicator
of market concern) shrank to its narrowest
since the end of July. Bank shares rose, as
did the Milan bourse as a whole. That re-
flected expectations that Mr Mattarella
would not call an election, but would in-stead broker a coalition deal between the
m 5 sand the centre-left Democratic Party
(pd). With the support of some indepen-
dents, they could muster slim majorities in
both houses of parliament.
Nicola Zingaretti, the leader of the pd,
fuelled the optimism. After weeks of ap-
parent resistance to the idea of a coalition
with the m 5 s, he said his party had given
him a mandate to negotiate a deal. Mr Zin-
garetti set five conditions: allegiance to the
European Union; environmentally sus-
tainable development; changing immigra-
tion policy to get Europe involved; more
economic redistribution; and fully accept-
ing parliamentary democracy. Curiously,
only the last point is likely to be difficult for
the Five Stars. The party was founded on a
commitment to let citizens vote directly on
legislation via the internet (though in prac-
tice it has let that idea slide).
Other issues may prove more trouble-
some. The pdare economic Keynesians
who favour big infrastructure schemes; the
Five Stars often oppose them on environ-
mental grounds. Mr Zingaretti’s demand
for a clean break with the previous govern-
ment may mean he would veto a cabinetpost for the m 5 s’s leader, Luigi Di Maio, who
served as deputy prime minister. And there
is suspicion that Mr Zingaretti may not
work hard to avoid an election: the pdhas
won ground in the polls since the previous
election and now leads the m 5 s.
The parties do not have much time. Italy
is rather slow to dissolve a parliament and
convene a new one; in 2018 it took almost
three months. If an election is to be called
this autumn, it must happen soon. Parlia-
ment needs to pass a budget by January.
That will be especially tricky this year. At
least €23bn ($25bn) in spending cuts or
new taxes are needed to meet the eu’s fiscal
rules and shrink the state’s immense debt,
equivalent to 132% of gdp. Otherwise Italy
will have to push ahead with plans to im-
pose a whopping value-added-tax in-
crease, which could kill off the feeble eco-
nomic recovery.
Ironically, European Commission offi-
cials would prefer a coalition that includes
Forza Italia, the centre-right party of Mr
Berlusconi. The m 5 sfavours higher welfare
spending, and it is felt in Brussels that an
“Ursula government” (so named because
the pd, the m 5 sand Forza Italia all backed
Ursula von der Leyen’s bid for the Commis-
sion presidency) would dilute its influ-
ence. But the anti-corruption m 5 sshuns Mr
Berlusconi, a convicted tax fraudster.
For Eurocrats, as for markets, the most
daunting scenario is an election. Control of
the Italian parliament can be secured with
around 40% of the vote. Polls suggest the
League could take 37%. The Brothers of Ita-
ly, a party of former neo-fascists, might getItaly’s government fallsSalvini’s gamble
ROME
“Il Capitano” hopes for elections. His opponents hope to avoid themEurope
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