- Current political and economic issues succinctly explained.
Italy’s 2018 national elections could deliver a stable government for the first time since Prime Minister Matteo Renzi stepped down in 2016 after the failure of his reform agenda. But the lead-up to the vote has seen the weakening of traditional parties and the rise of anti-establishment movements, an emerging pattern across the continent.
The outcome will likely have repercussions for the Italian economy, one of the world’s largest, which is still struggling with low growth, high unemployment, and unstable banks. It will also determine the role Italy plays in the European Union as the bloc struggles with further integration, the continuing migration crisis, and a persistent confrontation with Russia.
Why is Italy holding elections now?
Italy has been led by a caretaker government since December 2016, when Renzi resigned. Renzi had pressed for constitutional reforms that would have reshaped the legislature, eventually staking his leadership on a referendum on the issue, which Italian voters rejected by a nearly twenty-point margin.
Paolo Gentiloni, a member of Renzi’s center-left Democratic Party (PD) and former foreign minister, was appointed as a temporary prime minister until the next elections. These were scheduled for March 4, 2018.
What are the dominant issues?
Front and center is Italy’s role in the migration crisis that has shaken the European Union since 2015. The country’s economic performance has also driven voter dissatisfaction.
- The continent’s migration crisis has rocked Italian politics, as the country has borne the brunt of migrant and refugee arrivals from nearby North Africa. Italy absorbed more than six hundred thousand migrants over the last four years, with more than 180,000 arriving in 2016. Despite a slowdown in 2017 after the government made a controversial deal with Libyan militias to fight human traffickers, many Italian voters feel overwhelmed by the problem and abandoned by the European Union. This has driven the rise of Euroskepticism, boosted right-wing parties that have pledged to crack down on immigration, and led to incidents of violence between Italians and migrants.
- The Italian economy was hit hard by the 2008–2009 financial crisis, shrinking by nearly 9 percent by 2013. It suffered a double-dip recession as policymakers imposed budget cuts to try to rein in the country’s massive debt—now at about $2.8 trillion, over 130 percent of gross domestic product. Italy’s return to growth since 2014 has been sluggish, with double-digit unemployment persisting. Many analysts say that the economy needs deeper reforms to promote hiring and investment, while some Italian politicians blame the euro common currency and EU budget rules for hindering the recovery. Some worry that continued low growth or another recession could lead to a debt crisis that could threaten the eurozone.
- The banking system remains a major problem. Italian banks hold more than $220 billion in bad loans, which stifles lending and investment across the economy. The government’s attempts to rescue some banks using public funds has drawn criticism both from the European Union—which has imposed rules against bank bailouts—and from opposition parties that see bailouts as symptoms of Italy’s perennial corruption. EU rules stipulating that bank investors, mostly middle-class Italians, must take losses before the government can step in have angered voters and boosted opposition politicians. At the same time, analysts say, Italy is at risk of a broader financial crisis if banks begin to fail. Some worry such a crisis could spread to other weak banks around Europe.
Who are the primary contenders?
Like many other European countries, Italy has seen the rise of anti-establishment, often fringe, political forces. Support for the governing center-left PD has almost halved since the 2013 elections, while the center-right Forza Italia (FI) has needed to form an alliance with several far-right parties to have a chance at forming the next government.
Democratic Party: Since the 2013 elections, the PD passed labor legislation that economists say has created jobs and begun a program of recapitalizing Italy’s banks, but some on the left wing of the party have split with Renzi, weakening his bid to return as prime minister. Renzi remains the party leader, but some observers say that in the case of an inconclusive election, Gentiloni could be reappointed as a compromise choice for head of a grand coalition government.
Coalition of the Right: Former Prime Minister Silvio Berlusconi, who, at age 81, last held office in 2011, has achieved a comeback of sorts by assembling a coalition of right-wing parties. This includes his center-right Forza Italia, which is broadly pro-business. More radical is his ally the Northern League, a party originally devoted to the independence of Italy’s northern regions. Its leader, Matteo Salvini, has rebranded it into a national party based on an anti-immigration and Euroskeptic platform. Salvini has said he would take Italy out of the eurozone, though Berlusconi disagrees.
Five Star Movement: Polls show the most popular party ahead of the elections is the Five Star Movement (M5S), founded in 2009 by comedian Beppe Grillo. The party is an eclectic mix of ideologies and personalities, loosely united by a spirit of protest against Italy’s political establishment, which it sees as corrupt and outmoded. Its leaders have often criticized Italy’s participation in the euro and EU budget rules, and have called for tighter immigration policies.
What happens if the results are inconclusive?
In 2017, Italy changed its electoral system in a way that experts say makes it harder for any single party to win a majority in parliament. This was meant to encourage coalition building, they say, but could complicate forming a government.
Any party or coalition will likely need more than 40 percent support to win enough seats to govern. None are currently polling above that mark. Berlusconi’s alliance has polled around 35 percent. M5S has polled around 28 percent and Renzi’s PD just over 20 percent.
Berlusconi’s bloc might be forced to form a left-right alliance with the PD to create a broad, centrist coalition. However, a divided vote might also mean a more radical result: depending on the results, the Northern League could try to form its own government, as could, potentially, the M5S. M5S has long ruled out forming an alliance with any other party, but its charismatic young leader, Luigi Di Maio, has softened that stance in the lead-up to the polls.
How could the outcome affect the rest of the European Union?
Any new government could have repercussions throughout Europe. With the UK leaving the union, Italy is poised to become the bloc’s third largest economy, and its ability—or inability—to clean up its banks, return to growth, and put its national debt on a sustainable path will influence the health of other European economies as well as EU monetary and banking policy.
European officials worry especially about the hostility to EU institutions that now animates much of Italian politics. A government led by the Northern League or M5S could see a referendum on Italy’s membership in the eurozone, or a call to renegotiate the European Union’s foundational treaties. Even barring such a dramatic move, a Euroskeptic government would likely throw a wrench in French President Emmanuel Macron’s ambitious plans for deeper European integration.
Finally, most of the opposition contenders hold views on relations with Russia that would represent a sharp break with the status quo. Berlusconi is a close personal friend of Russian President Vladimir Putin. M5S leaders have spoken in support of Russia’s policy in Syria, criticized EU sanctions on Russia over its Crimea annexation, and called for Italy to play a reduced role in the North Atlantic Treaty Organization (NATO).
Putin’s government has also forged ties with the Northern League, as it has with other right-wing parties across the continent, raising the possibility that the next Italian government will challenge EU unity on its approach to Russia.