Italy's new coalition struggles with a government plan

Matteo SalviniROME – Italy appears on a path toward anointing its first ever populist government, something that would set the country on a collision course with Brussels over plans to cut taxes, ramp up spending, reconsider the euro currency, and dramatically curb the flow of refugees arriving on the country’s shores.

Negotiations to form a new government have dragged since an inconclusive March 4 general election. But two parties -- the anti-establishment Five-Star Movement and nationalist League -- appear to be inching toward an alliance that would have a razor-thin majority in Italy’s parliament.

Party leaders Luigi Di Maio and Matteo Salvini, respectively, had been expected to present their governing plan to Italian President Sergio Mattarella on Monday, but instead they asked for more time. Mattarella granted them “a few more days” to try to hash out their differences.

The Italian media reported that the delays are due to disagreements over who will be prime minister in the new government -- neither Di Maio nor Salvini will support the other in that post -- and the specifics of what could be a hundred-billion-euro ($120 billion) spending spree, including proposals for a flat income tax, an automatic basic income for all Italians, and more generous pensions.

Those policies would easily push Italy to the wrong side of European Union limits on government budget deficits, which, combined with worries about a possible Italian referendum on the future of the euro currency and policies aimed at turning away refugees from Africa and the Middle East, has European leaders nervously following developments in Rome.

As the likelihood of a populist government in Italy increased in recent days, the yield on Italian government bonds -- a measure of investor confidence in the country -- has climbed, with the rate on 10-year bonds trading above the 2-percent threshold Tuesday for the first time in more than a year. Meanwhile, the euro has steadily lost value against the dollar and other major currencies in recent days, approaching its lowest levels since December.

“It’s very possible that the parties will have to moderate their plans on a lot of these controversial areas once they try to govern,” Flavio Chiapponi, a political scientist with Italy’s University of Pavia and author of a book about the Five-Star Movement, said. “But during the campaign neither party was shy about criticizing the European Union, and their supporters do not expect them to back down. Nobody knows exactly how it will all play out?”

Nicola Pasini, a political scientist with the State University of Milan, noted that the parties are not a natural fit. Though their demographics do overlap, with both drawing support from young voters and those who oppose traditional political powers, their policies, especially on fiscal matters and on the environment, are often at odds.

Pasini also said they will both have to switch gears from campaigning to governing with only minimal experience to call on. This would be the first time the Five-Star Movement had a role in the government higher than the municipal level, and the League has only ever been a junior partner in governments led by billionaire tycoon Silvio Berlusconi. Both leaders are also very young -- Di Maio is just 31; Salvini 45.

“Both parties campaigned by attacking the political elite,” Pasini said. “Now they are on the verge of creating a government and becoming the political elite.”

Chiapponi said that would probably result in instability.

“I think we will have a power play between these two parties and as soon as one of them thinks his party will be better off with new elections, he could pull his support and the government would collapse,” Chiapponi said.

The 81-year-old Berlusconi, a four-time prime minister who resigned from his last government in disgrace in 2011, has been an unexpected wildcard in the process. Berlusconi had been banned from public office in connection to a major tax fraud conviction. But over the weekend, a tribunal lifted the ban.

Analysts agree it is very unlikely Berlusconi would have a formal role in the next government, especially since Di Maio agreed to negotiate with Salvini only on the condition that he drop Berlusconi as a coalition partner. But according to Giovanni Orsina, a historian at Rome’s LUISS University and the author of a book about Berlusconi, it is possible a reinvigorated Berlusconi could push for some policies behind the scenes.

“If Berlusconi believes he is strong do not be surprised if he tries to act on that belief,” Orsina said. “He can still make his voice heard.”

A version of this story can be found on Washington Times.

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