The EconomistJanuary 27th 2018 Europe 432 ciency with better economic protection. If
he does not succeed, he could wind up as a
failed reformer like Mr Renzi, leaving the
terrain to figures like Ms Le Pen or the left’s
Jean-Luc Mélenchon. Their versions of
welfare-state reform promise to render the
labour market even more rigid, and to
spend money that France does not have. It
already spends 31.5% ofGDP on social pro-
tection, the most in the OECD and nearly as
high as Sweden at its peak. An electoral vic-
tory by Italy’s Five Star Movement in
March could have a similar effect.
As for Poland’sPiS, it shows scant con-
cern for the long-term affordability of its
welfare policies. Even as Poles rapidly age,
PiSis cutting the retirement age from 67 to
65 for men and 60 for women. That will
further depress the ratio of workers to pen-
sioners in a country that already suffers
from massemigration and a low fertility
rate. But however misguided, such moves
are popular. If liberal parties cannot devise
their own credible alternatives, populists
could end up winning and holding power
in more European countries by promising
welfare for all. 7T
HE man who has done more than any-
one to create an air of apprehension
around Italy’s coming election is a genial
fellow with a round face, a broad nose and
silvery hair combed forward in the style of
the ancient Romans. Five years ago, Clau-
dio Borghi, a former managing director of
Deutsche Bank in Italy, converted Matteo
Salvini, the head of the Northern League,
to the view that Italy should quit the euro.
“Salvini called me at half past one in the
morning,” he recalls. “But it didn’t matter
because I don’t sleep.” After two days of ex-
planation, Mr Salvini, soon to become
leader of the League, was convinced. The
following year, he and his new economic
adviser set off on a “Basta euro” (roughly,
“dump the euro”) tour.
The concern in EU governments and
capital markets over the vote on March 4th
centres on the possibility thatthe League
will return to government, and the remot-
er, but still conceivable, prospect of Mr Sal-
vini becoming prime minister. His party
has only recently, and only barely, been
overtaken in the polls by its electoral ally,
Silvio Berlusconi’s Forza Italia. Their alli-
ance, which also includes a smaller far-
right group, the Brothers of Italy, appears to
be the only one with even a chance of win-ning a parliamentary majority, and the
three leaders have agreed that, ifthey gain
one, the party with most votes should
name the prime minister (who would,
however, need to be endorsed by the presi-
dent, Sergio Mattarella).
The League, which campaigns for
tighter immigration controlsand sits in the
European Parliament with other populist
parties such as France’s National Front and
Austria’s Freedom Party, might also gain
power as part of a broader coalition. Or it
might join the intermittently eurosceptical
Five Star Movement (M 5 S) in a partnership
that Mr Salvini has discounted publicly,
but which senior League officials are ready
to contemplate privately. That is the night-
mare scenario that terrifies Italy-watchers.
Mr Borghi’s hostility to the euro is un-
dimmed. “We live in a country whose di-
rect competitor can shut down ourbanks if
we do not obey it,” he says. “Is that some-
thing a nation that is supposed to be free
can endure?”
The depth of the League’s commitment
to leaving the euro is less clear. On January
11th Mr Salvini said Italy would need to co-
ordinate its exit with that of“other coun-
tries in difficulty”, and that the next gov-
ernment should anyhow focus on negoti-
ating changes to the single currency. If
conceded, they would obviate the need for
leaving. That appears to kick Italy’s depar-
ture a long way down the road.
There are two reasons for the League’s
newly cautious approach, Mr Borghi says.
First, the defeat of Marine Le Pen in last
year’s French presidential election shat-
tered hopes of France and Italy leaving to-
gether. Mr Borghi is working on procedures
for a unilateral exit, but they would need to
include, for example, measures to prevent
a run on the banks. A second reason arose
from the need for broad popular support
for a decision, the League maintains, that
can only be taken by government (M 5 S’sfounder, Beppe Grillo, has advocated a
consultative referendum, but no such pro-
posal figures in its electoral programme, a
sign of growing differences that may lie be-
hind his decision this week to separate his
blog from that of his party). The latest poll,
last September, showed opinion for and
against the euro to be tied.
But even in the League’s heartland,
grumbling about the single currency is one
thing; actually quitting it another. Vicenza
registered the highest turnout of any prov-
ince in the Veneto region in a League-spon-
sored consultative referendum on autono-
my last year. But itsexport-oriented firms
are profiting handsomely from the recov-
ery in Europe, and no one seems keen to
rock the boat. Sales to the rest of the EU
were up by 4% last year, saysLuciano Ves-
covi, the local president of the bosses’ asso-
ciation, Confindustria, who sees the euro
as indispensable. Germany may be Italy’s
main competitor, he accepts, but in and
around Vicenza itis also the main custom-
er. Much of the leather upholstery that
goes into German luxury cars is tanned at
Arzignano, west of the city.
Vicenza also hostsEurope’s biggest gold
and jewellery show, Vicenzaoro, which
closed on January 24th. Among manufac-
turers, attitudes to the single currency are
more jaundiced, says Roberto Ciambetti,
the Speaker of the regional assembly and a
senior League official. The strength of the
euro curbs sales outside the EU and makes
exporters vulnerable to competition from
Turkey. But that, he says, is a reason for re-
visiting the rules surrounding the euro, no-
tably the 3% deficit limit, not for getting out.
There is plenty to fret about in Italy’s
election. The parties are making wild
promises that, if implemented, would add
substantially to Italy’s already vast public
debts ofmore than 130% ofGDP. But the
idea that the vote could lead to an exit from
the euro looks fanciful. 7ItalyLeague of sceptics
MILAN AND VICENZA
Despite the fears, no one really wants
Italy to leave the euroWhich way will Salvini jump?
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