Structural considerations for a prosperous Greece
Podcast - What does Brexit mean for the UK-Greece relationship?
Podcast - The rise and fall of Golden Dawn
Podcast - What is Greece going to do with the EU's Covid-19 recovery funds?
The risk of losing control before help arrives
Podcast - Covid-19 takes another bite out of the Greek economy
An uncertain and wasted year for Italy
PM-designate Carlo Cottarelli is expected to submit his cabinet composition to President Sergio Mattarella on Tuesday, May 29. Within ten days from the oath-taking ceremony, the new government will have to go before both houses of parliament to secure a confidence vote.
Regardless of the high profile of the new PM and his likely ministers, the new government will struggle to reassure investors and calm the markets. As the new government will fail to win parliamentary backing, Cottarelli would head a caretaker government that would simply ferry Italy to elections that would most likely be held in September or early October.
Facing a parliament that is overwhelmingly bitterly opposed to the new government, Cottarelli will have to tread very carefully in the months ahead. At best, Cottarelli’s tenure in office will avert the risk of expansionary spending measures in the short term and buy Italy some time. In short, 2018 will be a largely a wasted year, with no ability to deliver any meaningful policy while the end of QE is approaching.
The previous PM-designate, Giuseppe Conte, returned the mandate to form a new government on Sunday, leading Italy’s two main populist to drop their joint bid to create a government.
Conte gave up on forming a government after Mattarella blocked the nomination of Eurosceptic Paolo Savona as economy minister. Savona was put forward as economy minister by the Five Stars Movement (M5S) and the League, which after reaching an agreement on a governing arrangement had opted to propose Conte as PM. Savona is generally regarded as a figure backed by the League due to his well-known hawkish stance on the Euro.
The M5S and the League may seek to use their parliamentary majority to keep the legislative process ongoing to pursue some of the measures listed in their “contract” ahead of the next vote. M5S’ call for the impeachment of Mattarella is largely a side-show that will go nowhere and is aimed at boosting the popularity of the party now that it finds itself on the backfoot vis-à-vis the League.
Looking further ahead, it is hard to see how Italy can emerge from the ongoing political-institutional crisis in a better place politically. The main risk is that the stand-off will further embolden the M5S, and especially, the League. The two populist parties will blame the “establishment” for denying them the right to govern. A narrative that will further polarize society.
It is also likely that the next election campaign will feature significantly stronger anti-Euro and Eurosceptic tones. The League leader Matteo Salvini has already said that the next vote will be a “referendum” to free Italy from the “slavery regime” imposed by the EZ, Berlin, the markets and the spread.
While it is doubtful that that M5S and/or League will embrace a clear Euro-exit platform, the two parties will call for a more combative approach towards Brussels, a rejection of the eurozone’s fiscal rules, and an Italy-first agenda. In the wake of the standoff with Mattarella, the M5S has promptly re-embraced its more radical anti-systemic views by calling for a mass mobilization against the president on 2 June.
Unlike former technocrat prime minister Mario Monti – who enjoyed a clear cross-party support – Cottarelli will be alone. In fact, the choice of the former IMF official – the ‘antithesis’ of the vetoed Paolo Savona – for the PM job is a major blunder by Mattarella. Cottarelli will be used by the two populist leaders, Luigi Di Maio and Matteo Salvini, as a punching bag in the months ahead.
Mattarella’s ability to “protect” his neutral government will be severely impaired by the deep cleavage that now exists between the presidential palace and the political forces that hold a parliamentary majority.
*Wolfango Piccoli is co-president of Teneo Intelligence. He also serves as director of research and covers political risk in Europe, with a special focus on Italy, Greece and Turkey.
You can follow Wolfango on Twitter: @wolfpiccoli
What is uncertain and wasted is the EU and the grotesque German monster which feeds it to the detriment of democracy and in clear violation of all unalienable rights known to men, women, and children. Shame on German hypocrisy and German complete lack of morality.