Italy back to the polls in September and the right is on the rise – what to look out for

While Italy is not new to political instability or to rather frequent and sudden elections, the most recent crisis is taking place in an extremely delicate moment. A wide range of factors are keeping the international community busy, and in addition to the current pandemic, other issues have also started to accumulate. At the forefront, we find Russia’s ongoing invasion of Ukraine with all its ramifications and in terms of the international community’s and Europe’s support, this has put even more pressure on the global community. In addition, the increasingly concerning energy crisis is already showing its effects and adding more stress to the system. This domino effect has created the perfect storm, where inflation is rising uncontrollably, and the fear of a recession becomes more real every day. Thus, as it has been possible to observe during the COVID-19 pandemic, leadership during a crisis is arguably a most crucial factor. Evidently, in such a peculiar moment where a pandemic, a war and inflation are simultaneously in need of being managed, the need for a reliable and trustworthy leader is clear. However, Italy’s next possible PM does not seem to be willing to maintain the previous government’s approach on the numerous issues we are facing. Even if we were to remove the political factor from the equation, there is plenty of evidence suggesting that if Brothers of Italy were to win, the repercussions could be dire.

Particularly in recent years, it has been possible to observe to what extent a change of leadership can steer a country, and what kind of effects it has on the global economy and community as well. The globalized society we live in does not leave anyone or anything isolated, and any change is going to be felt one way or the other. That is why, Italy’s precarious situation is already starting to show its first symptoms. The first remark necessary to be made concerns the ECB and the consequences of a possible right-wing victory. While during Draghi’s government there were arguably no real concerns from the side of the ECB, Italy’s future is becoming increasingly uncertain. While the spread has never truly ceased to be an issue, following Draghi’s departure, “market nerves have been further jangled by polls that forecast it will be succeeded on Sept. 25 by a conservative bloc that includes one far-right party and two that have promised steep tax cuts and that were openly Eurosceptic just a few years ago”.¹ Such scenario will not only perpetuate Italy’s unstable economic situation, but could bring about even more issues. If an extreme right-wing Eurosceptic party were to become the face of Italy and lead accordingly, Italy’s market-related trustworthiness could be more in jeopardy than normal. This naturally puts the ECB in a rather uncomfortable position that of already having to contemplate yet another intervention along with other member states. Understandably, Meloni has been attempting to ease concerns relating to her stance towards the EU and Italy’s sovereign debt; and as stated by Danske Bank AS’ chief strategist: it appears to be temporarily working.² Nevertheless, the volatility of markets, of Italy’s future and of an incumbent recession, further complicate things. Further evidence can be found in Draghi’s words “domestic credibility goes hand in hand with international credibility”. The Financial Times reported Italy’s ex-prime minister’s comment when highlighting a rather worrisome point concerning the rightwing coalition’s will to review the details of Italy’s 200bn recovery fund. This, however, would only add even more uncertainty to an already precarious situation. The market is already reacting, considering that large investors have already made up their minds. One, for instance, remarked how “Italy seems like it’s going to be the most vulnerable country to worsening economic conditions”. ³ In fact, as reported by NASDAQ, “investor bets against Italy’s government bond market are at their highest since 2008, data from S&P Global Market Intelligence suggests, in a sign of growing unease about Italy’s economic and political outlook”.⁴ This further exemplifies the relevance of the upcoming choice of leadership for Italy.

Naturally, among the myriad of issues derivable from this possible political scenario coming to life, the relationship between Italy and the EU could be seen as one of the matters at the forefront of the debate - and the speculations. The wide discrepancy between the EU and particularly the Italian right-wing parties has never been a secret, but as a party in government, they could realistically cause more damage than in the past. Some already postulate possible frictions between the EU and these parties. For instance, JPMorgan’s Marco Protopapa sees “a considerable potential for conflict with the EU, although no longer because of Italexit concerns, but on account of a declared aversion to fiscal restraint and some reforms.”⁵ Right-wing dissensus for the EU’s fiscal (and other) constraints has always been strong, but even the mere possibility of the Italian government moving from words to facts, is enough to generate real concern. As evidence of this and as aforementioned, both Giorgia Meloni and League leader Matteo Salvini have been attempting to reassure the markets that while the disagreement is present and attempts will be made to change the rules of the game, the respect of the deals and rules in place will be guaranteed by the Brothers of Italy.⁶ While such guarantees should suffice in keeping the situation from escalating, the degree of reliability of such claims is extremely low. In line with the populist modus operandi, it would not be farfetched to assert all the promises we are hearing and will be hearing, will not be kept. Meloni and Salvini’s political style does not stand on its own, and following the populist tradition, their strategies make consistent use of scapegoating. It could be asserted that not long after Meloni’s possible raise to power, the situation will rapidly spiral out of control, and someone will have to be blamed. Observing Salvini and Meloni’s past and current rhetorical and political strategies, this claim appears rather irrefutable. The EU, or “Brussels” as Italian populists label it, has always been the right’s favorite scapegoat whenever something does not work out, or a particular promise could not be realistically kept. Therefore, preaching cooperation and respect for rules that have been repeatedly and publicly demolished, does not really seem like a promising start. The likelihood is that once the markets start shaking and Italy will be in need of help, populists will turn to the EU just to blame it for a situation they themselves have caused.

Understandably, the situation is a rather complex one. Now more than ever, the fate a country really does lie in the hands of its electorate. These turbulent times and this election could be described as pivotal, as the consequences of its outcome are going to have rapid and real repercussions not only on the Italian people but also far beyond. As inferred above, Italy is not in the position to experiment with alternative leadership in this moment. Thus, coupling an unstable international situation, with economic turmoil, an energy crisis and inflation, does not seem a safe course of action. Italy is now facing a watershed moment itself: one choice could preserve some sort of internal/external stability, whereas the other could very well mark the beginning of Italy’s distancing itself from the EU, with all the consequences of the case falling on the general population. With the world becoming gradually more polarized, the necessity for the European Union remain as united a front as possible is undeniable. If another country were to begin internal obstructionism with regards to EU policies, the situation would drastically - and unnecessarily - increase in complexity and bring about even more issues along the way. And unfortunately, Italians are going to be the ones having to pay a very high price for this.