A center-right coalition will likely win the upcoming national elections, and that may lead to far-reaching, unexpected consequences, writes Claude Baumann in a piece for finews.first.
This article has been published on finews.first, a forum for authors specializing in economic and financial topics.
The newest polls are very clear. Italy's center-right coalition will win the general elections on 25 September 2022. A recent survey by Ipsos, a market research institute, for the Italian daily newspaper «Corriere della Sera» showed the conservatives having a commanding lead of 46.6 percent of the vote while the center left-wing alliance only came up with 27.2 percent.
That likely means that the far-right party Fratelli d'Italia (FdI, or ‹Brothers of Italy› in English) will get 25.1 percent of the vote, while the populist Lega (League, formerly the Northern League) party will receive 12.5 percent, and the more moderate conservative party Forza Italia (roughly translatable as ‹Forward Italy›) 8 percent. In normal times, those polling figures would be a symbol of stability – something financial markets tend to appreciate.
But electing such a coalition could have far-reaching, unexpected consequences, given that all three parties are in very different positions right now.
«Her opposition has been tough, but upright»
Giorgia Meloni, FdI's leader, has clearly opposed the current government under Prime Minister Mario Draghi. Her opposition has been tough, but upright, and it eventually led to a dialogue between both of them. That can be interpreted as a sign of mutual respect.
However, Matteo Salvini, Lega's leader, and Silvio Berlusconi, Forza Italia's founder, are using the crisis prompted by the Five Star Movement under former Prime Minister Giuseppe Conte to stall a confidence vote earlier this year. Both want to bring down Draghi's government as quickly as possible. Berlusconi's plan was to block talks between Maria Stella Gelmini, currently a minister in Draghi's government, with Carlo Calenda, founder and leader of the Partei Azione (Action Party in English). He wanted to combine the more moderate voices of his party with Azione's, which he managed to do afterward. Salvini wanted to suppress the ambitions of the more moderate voices in his party around minister Giancarlo Giorgetti, who was trying to bring about a new, more liberal era in Italy.
«Historically, Italy's right has suffered from a lack of recognizable individuals»
Against this background, both Berlusconi and Salvini used their past experience as the country's leaders to raise their popularity. Meloni cloaked her rising ambition behind her attempt to position herself as a political allrounder. In that way, it is no coincidence that she has been soothing the EU with messages about cutting fiscal expenditures while telling her domestic allies that the country is falling apart.
Historically, Italy's right has suffered from a lack of recognizable individuals. It is no secret that Meloni is desperately trying to pluck suitable, credible candidates, even from straight off the street. But the weakness of such candidates is that they are not politicians. That would make Meloni extremely vulnerable during any internal crisis.
The FdI's critics accuse the party of having neofascist sympathies. The one thing that is certain is that Meloni has never chosen to take the same path that Gianfranco Fini did in 1995 when he established Alleanza Nazionale (National Alliance in English). At the time, he severed the party's remaining links to fascist elements and reaffirmed his commitment to Nato and the EU.
«This goes without mentioning Salvini and Berlusconi's pro-Russian stance, which is clearly problematic»
Meloni has never condemned the far-right elements in her party and there are still fears that any remaining links could potentially have embarrassing consequences. And that goes without mentioning Salvini and Berlusconi's pro-Russian stance, which is clearly problematic.
An extended period of high inflation, elevated interest rates, and slow growth could be fatal for a highly indebted country such as Italy. Draghi has always maintained that it is critical to maintain an adequate balance between debt and GDP. If the Draghi government manages to pass the first phase of its national reform program, any future government would have to resist following overly generous policies aimed at securing continued national prosperity in order to tackle the energy crisis.
If the FdI manages to implement its plans to revive national infrastructure and turn Italy into a Mediterranean energy hub by increasing the capacity of the natural gas pipelines with North Africa, that could help GDP growth enough to bear the country's debt load.
«Europe cannot afford to have another repeat of the Greek crisis»
Beyond that, any new government, like others in Europe, will have to make adjustments to the current investment and reform plan that is in place to manage the impacts of the pandemic as a result of the massive increase in prices for raw materials.
The litmus test for any future government will be the spread between Italian and German government bonds. It will be lethal if the spread rises towards 450-500 basis points. Europe cannot afford to have another repeat of the Greek crisis – particularly for an economy as large as Italy's.
Carlo Calenda of Partei Azione is the third candidate in the current election and he has already voiced the idea of a large governing coalition. Right now, that seems to be wishful thinking for a party that is not really in the running. But should a center-right coalition fail, such a coalition could be the best medicine for Italy.
This article was written together with Italian publicist Giuseppe Wrzy.
Claude Baumann is founder and CEO of finews.ch, finews.asia in Singapore and finewsticino.ch in Ticino. Previously, he wrote for «Weltwoche» and «Finanz und Wirtschaft». He also co-founded the publisher Nagel & Kimche and launched business travel magazine «Arrivals». He is the author of several books on the banking industry, the most recent of which was a biography of Robert Holzach.
Previous contributions: Rudi Bogni, Peter Kurer, Rolf Banz, Dieter Ruloff, Werner Vogt, Walter Wittmann, Alfred Mettler, Robert Holzach, Craig Murray, David Zollinger, Arthur Bolliger, Beat Kappeler, Chris Rowe, Stefan Gerlach, Marc Lussy, Nuno Fernandes, Richard Egger, Maurice Pedergnana, Marco Bargel, Steve Hanke, Urs Schoettli, Ursula Finsterwald, Stefan Kreuzkamp, Oliver Bussmann, Michael Benz, Albert Steck, Martin Dahinden, Thomas Fedier, Alfred Mettler, Brigitte Strebel, Mirjam Staub-Bisang, Nicolas Roth, Thorsten Polleit, Kim Iskyan, Stephen Dover, Denise Kenyon-Rouvinez, Christian Dreyer, Kinan Khadam-Al-Jame, Robert Hemmi, Anton Affentranger, Yves Mirabaud, Katharina Bart, Frédéric Papp, Hans-Martin Kraus, Gerard Guerdat, Mario Bassi, Stephen Thariyan, Dan Steinbock, Rino Borini, Bert Flossbach, Michael Hasenstab, Guido Schilling, Werner E. Rutsch, Dorte Bech Vizard, Adriano B. Lucatelli, Katharina Bart, Maya Bhandari, Jean Tirole, Hans Jakob Roth, Marco Martinelli, Thomas Sutter, Tom King, Werner Peyer, Thomas Kupfer, Peter Kurer, Arturo Bris, Frederic Papp, James Syme, Dennis Larsen, Bernd Kramer, Armin Jans, Nicolas Roth, Hans Ulrich Jost, Patrick Hunger, Fabrizio Quirighetti, Claire Shaw, Peter Fanconi, Alex Wolf, Dan Steinbock, Patrick Scheurle, Sandro Occhilupo, Will Ballard, Nicholas Yeo, Claude-Alain Margelisch, Jean-François Hirschel, Jens Pongratz, Samuel Gerber, Philipp Weckherlin, Anne Richards, Antoni Trenchev, Benoit Barbereau, Pascal R. Bersier, Shaul Lifshitz, Klaus Breiner, Ana Botín, Martin Gilbert, Jesper Koll, Ingo Rauser, Carlo Capaul, Claude Baumann, Markus Winkler, Konrad Hummler, Thomas Steinemann, Christina Boeck, Guillaume Compeyron, Miro Zivkovic, Alexander F. Wagner, Eric Heymann, Christoph Sax, Felix Brem, Jochen Moebert, Jacques-Aurélien Marcireau, Ursula Finsterwald, Michel Longhini, Stefan Blum, Zsolt Kohalmi, Karin M. Klossek, Nicolas Ramelet, Søren Bjønness, Gilles Prince, Salman Ahmed, Peter van der Welle, Ken Orchard, Christian Gast, Jeffrey Bohn, Juergen Braunstein, Jeff Voegeli, Fiona Frick, Stefan Schneider, Matthias Hunn, Andreas Vetsch, Fabiana Fedeli, Marionna Wegenstein, Kim Fournais, Carole Millet, Swetha Ramachandran, Thomas Stucki, Neil Shearing, Claude Baumann, Tom Naratil, Oliver Berger, Robert Sharps, Tobias Mueller, Florian Wicki, Jean Keller, Niels Lan Doky, Karin M. Klossek, Johnny El Hachem, Judith Basad, Katharina Bart, Thorsten Polleit, Bernardo Brunschwiler, Peter Schmid, Karam Hinduja, Zsolt Kohalmi, Raphaël Surber, Santosh Brivio, Mark Urquhart, Olivier Kessler, Bruno Capone, Peter Hody, Andrew Isbester, Florin Baeriswyl, and Michael Bornhaeusser, Agnieszka Walorska, Thomas Mueller, Ebrahim Attarzadeh, Marcel Hostettler, Hui Zhang, Michael Bornhaeusser, Reto Jauch, Angela Agostini, Guy de Blonay, Tatjana Greil Castro, Jean-Baptiste Berthon, Marc Saint John Webb, Dietrich Goenemeyer, Mobeen Tahir, Didier Saint-Georges, Serge Tabachnik, Vega Ibanez, David Folkerts-Landau, Andreas Ita, Teodoro Cocca, Michael Welti, Mihkel Vitsur, Fabrizio Pagani, Roman Balzan, Todd Saligman, Christian Kaelin, Stuart Dunbar, Carina Schaurte, Birte Orth-Freese, Gun Woo, Lamara von Albertini, Philip Adler, Ramon Vogt, Andrea Hoffmann, Niccolò Garzelli, Darren Williams, Benjamin Böhner, Mike Judith, Jared Cook, Henk Grootveld, Roman Gaus, Nicolas Faller, Anna Stünzi, Thomas Höhne-Sparborth, Fabrizio Pagani, Taimur Hyat, Ralph Ebert, Guy de Blonay, Jan Boudewijns, Beat Wittmann, Sean Hagerty, Alina Donets, Sébastien Galy, Roman von Ah, Fernando Fernández, Georg von Wyss, Stéphane Monier, Stefan Bannwart, Andreas Britt, Frédéric Leroux, Nick Platjouw, Rolando Grandi, Philipp Kaupke, Gérard Piasko, Brad Slingerlend, Dieter Wermuth, Grégoire Bordier, Thomas Signer, Brigitte Kaps, Gianluca Gerosa, Lars Jaeger, Christine Houston, Manuel Romera Robles, Fabian Käslin, Claudia Kraaz, Marco Huwiler, Lukas Zihlmann, Nadège Lesueur-Pène, Sherif Mamdouh, and Harald Preissler.
