Why you should care
Because the man who could become Italy’s next prime minister is on a collision course with the European Union.
This is an OZY Special Briefing, an extension of the Presidential Daily Brief. The Special Briefing tells you what you need to know about an important issue, individual or story that is making news. Each one serves up an interesting selection of facts, opinions, images and videos in order to catch you up and vault you ahead.
WHAT TO KNOW
What happened? Italy was plunged into fresh political turmoil this week after Prime Minister Giuseppe Conte stepped down, leading to the collapse of the country’s 65th government since World War II ended. Interior Minister Matteo Salvini, an ambitious populist, delivered the death knell for the shaky partnership between the anti-establishment 5-Star Movement and his own far-right League by calling for early elections. While an increasingly popular Salvini might get his shot at the top job, he could also find himself locked out if he upsets enough potential allies.
Why does it matter? Italy is facing a crippling financial crisis that’s saddled the Eurozone’s third-largest economy with one of the world’s highest ratios of debt. It’s unclear whether selfie- and social media-loving Salvini — who Richard Gere recently called “Baby Trump” for his anti-migrant rhetoric — is capable of steering it in the right direction. His leadership could further antagonize the European Union, and for a politician who’s built his popularity by poking Brussels, that might just be his plan.
HOW TO THINK ABOUT IT
Stopping Salvini. His opponents, which include the 5-Star Movement and the center-left Democratic Party, are attempting to create a replacement government before the next scheduled election in three years, hoping his popularity will dwindle by then. These days, though, his Euroskeptic party polls at just under 40 percent — up from around 17 percent last year — and it snatched twice as many votes as its former coalition partner during May’s elections to the European Parliament. Some say that’s enough support for it to lead a government on its own. Salvini’s enemies have two options: Unite under an anti-Salvini banner, or duke it out in early elections.
Budget crunch. Some analysts say the charismatic Salvini, who embarked on a beach tour in southern Italy this month to whip up support, has his eyes on a major prize: pushing through a 2020 budget that flouts European fiscal rules, partly by including massive tax cuts as well as a proposed flat tax rate. Brussels — desperate to compel Rome to reduce its public debt — would likely interpret that as a challenge. One Italian newspaper editor writes that the oncoming political clash, at least domestically, “will become a kind of referendum on national identity and the relationship with Europe.”
Silver linings? Few, apart from Salvini, welcome another Italian crisis. Yet after Tuesday’s collapse of the government, investors didn’t seem to panic — possibly because they’re used to the country’s chaotic politics and (predictably) dysfunctional economy. Besides, the European Central Bank is preparing to unveil new stimulus measures soon. Basically any other Italian government, some observers suggest, might be more business-friendly than the ineffectual coalition that preceded it. That would be especially true if it’s led by a tax-slashing Salvini.
…or maybe not. Others aren’t so sure. After all, Italy boasts one of the highest debt ratios (about 134 percent of its GDP) in the world. Compounding that concern is the fact that its economy is barely growing, raising fears that it could default on that debt in what would amount, one economist told The New York Times, to “a big tsunami in financial markets.” At the same time, Italy’s in dire need of painful structural reforms — the kind that even the most robust of governments would be loathe to implement. For a leader who’s built his political capital on populism, that prospect seems unlikely.
WHAT TO READ
Why Do Italy’s Governments Collapse So Often? By Catherine Edwards in The Local
“In some ways, this instability is a feature rather than a bug of the system.”
Italy’s ‘Hail Matteo’ Pass, by The Wall Street Journal
“An unreformed and miserable Italy isn’t any less of a threat to European political and economic stability than an Italy Mr. Salvini is trying to revive with a tax overhaul and some policy reforms.”
WHAT TO WATCH
Italy Political Crisis: Why Does Salvini Want an Election?
“He doesn’t know what’s around the corner, and it’s better for him to be in the driving seat before turning the corner.”
Watch on France 24 on YouTube:
Will Italy Election Turmoil Escalate Tensions With the EU?
“If Mr. Salvini…becomes prime minister, the budget process and the discussions with Brussels will be very difficult — no doubt about it.”
Watch on Deutsche Welle on YouTube:
WHAT TO SAY AT THE WATERCOOLER
Russian relations. Adding to its political turmoil, Italy appears to have a Russian meddling problem of its own: A recent investigation alleged that a close aide to Salvini had attempted to secure tens of millions of dollars in illegal Russian funding for his party. The scandal has become known locally as “Russiagate.”