Italy’s Prime Minister Resigns – Next Steps Unclear

Wednesday, August 21, 2019 - 10:00am

Yesterday, Italian Prime Minister Giuseppe Conte resigned. His move pre-empted a no confidence vote in the Government that was called by the far-right, anti-immigration League Party, headed by Deputy Prime Minister Matteo Salvini. Conte blamed Salvini for undermining the coalition government—just 14 months into a 5 year term—in search of short-term political gains.

This leaves Italy in a political vacuum in a difficult moment: they have not yet nominated a European Commissioner, they will perhaps not be represented at this weekend’s G7 meetings, and Italy urgently needs to pass a budget.

There are a few possible outcomes. Italian President Sergio Mattarella is charged with deciding the next course of action:

  1. At the moment, the most likely scenario is that the antiestablishment, populist 5 Star Movement (the League’s current coalition partners) could form an alternative government with the center-left Democratic Party, formerly led by former PM Matteo Renzi. This would effectively remove the League from power. The key challenge is that the 5 Star Movement was set up primarily to counter the Democratic Party, and there is plenty of personal animosity between Renzi and 5 Star leader Luigi Di Maio.
  2. The League is pushing for new elections, hoping to capitalize on its position as the most popular party in Italy based on current polls and their victory in May’s European Parliament elections. Polls indicate the League would win a plurality any snap election, and could govern in a new coalition either with the center-right Forza Italia (Berlusconi’s party) or the far-right (quasi-fascist) Brothers of Italy. If new elections are necessary, they could take place as soon as late October.
  3. President Mattarella could elect to install a technocratic government, like the one led by Mario Monti a few years ago, to pass necessary budget legislation. A majority of Parliament would have to back this move.

The two least likely options would be: the emergence of a broad coalition comprising all the pro-EU parties: the 5 Stars, center-left Democratic Party, and the center-right Forza Italia, or a serious U-turn by both the League and 5 Star Movement to make amends and continue with the current government, with a reshuffled cabinet and a new compromise Prime Minister.

There is considerable urgency to pass coherent budget legislation this fall, because Italy has promised to lower its annual deficit significantly to avoid an EU-mandated rise in VAT on January 1 that could cripple consumer spending, at a time when Italy is already flirting with recession.

Italy’s power struggle is a continuation of Europe’s political upheavals, as established parties fight for the support of volatile electorates against insurgent movements of all stripes.

This trend has also kept Spanish Prime Minister Pedro Sánchez from setting up his own government. Spain is also likely to face elections this fall to try to break its own parliamentary stalemate. Similarly, the drift of Britain’s Conservative Party to the right has primarily been driven by the rise of the Brexit Party.