Italian Elections Update: Italy Has a New Left-Right Populist Government

           The Italian Republic’s new left-right populist government was sworn into office today, nearly three months after inconclusive parliamentary elections in which no party won a majority. 

The new executive is a coalition between the anti-establishment populists, who were the single party that won the most votes and seats in the March 4 elections, and the far-right anti-migrant party, which was the largest party of the right-wing bloc that collectively won the most votes and seats, edging out the conservatives, who are not supporting the government.  The third largest right-wing party is supporting the government.  The center-left, who governed, through three premierships, for a five-year term with a smaller center-right party, were the second largest individual party, well behind the populists and the right-wing bloc.  The new Prime Minister is Italy’s sixth unelected premier.  The heads of the two parties are each vice-premiers, with the right-wing one also holding the portfolio of the Interior ministry, in order to execute his plan to deport significantly more migrants fleeing war and persecution.  The new government is expected to win confidence votes soon in both chambers of Parliament.

The ruling coalition had changed its designee for Minister of the Economy after the President objected over the weekend to the designee’s secret plan to change Italy’s monetary unit from the Euro, the currency of the European Monetary Union, back to the lira, as the parties did not campaign on leaving the euro and thus had no mandate even to start such a process, in addition to the need for international obligations that would necessitate an orderly negotiated process for leaving the eurozone.  The populist party leader also gave an assurance that leaving the euro was not the incoming executive’s goal.  I had summarized the positive and mostly negative elements of the populist program in a post last month.  The coalition government has a slim majority and will likely be unstable.

With the latest developments this week, the Italian stock market and bond improved, as have international markets, as uncertainty has ended and the fears about the potential disruption of Italy’s abandonment of the euro and perhaps even of the European Union, which would likely end the project, have eased.  There remains uncertainty about the populist Italian Government’s plans to exceed E.U. spending limits, despite the massive public debt of the Italian Republic.  Italy has the eighth largest economy in the world, which is the fourth largest in Europe and the E.U., and the third largest in the eurozone, but its debt is second only to Greece’s in proportion.  The swearing in of the new government not only avoids an unprecedented summertime vote, but will allow Italy to avoid a large increase in the value added (sales) tax because of E.U. rules through the adoption of a budget.

Italy is a strong ally of the United States as both a member of the North Atlantic Treaty Organization and in the War on Terrorism.