Report Card: How Much Progress Have Italy’s Populists Made?

(Bloomberg) -- Italy’s populist government is locked in a tussle with the European Commission over the spending spree it has planned for next year.

The coalition partners—the anti-establishment Five Star Movement and the anti-migration League—swept into power promising to turn things around quickly for voters frustrated by years of stagnation. But getting things done is proving harder than their voters were led to expect and their patience is starting to fray.

Here’s a progress report on the coalition’s main policy objectives.

Tax Cuts and Benefits Spending

  • Verdict: In the balance

The 2019 budget earmarks money to pay for the populists’ main pledges—a “citizen’s income” for the poor, a lower retirement age and tax cuts.

The commission has demanded that the government rein in its largess and senior ministers are trying to work out how to win European approval without surrendering their key policies. Parliament is due to approve the spending plan by the end of the year. The government has yet to decide on the details of the measures or when they will come into force.

Report Card: How Much Progress Have Italy’s Populists Made?

Potential nightmare scenario—President Sergio Mattarella has a constitutional duty to ensure a balanced budget, with adequate funding for new laws, and respect for international commitments. So he could refuse to sign the budget law and send it back to parliament for revision. But he can only do that once.

Creating Good Jobs

  • Verdict: Could do better

The so-called “Dignity Decree” set a ceiling for the proportion of short, fixed-term employment contracts in a given company, raised compensation payments for illegitimate sackings, and increased fines for breaking a ban on gambling ads.

It was given final approval by the Senate in August. But a September ruling by Italy’s Constitutional Court indicated that part of the decree is unconstitutional.

Dirty Steel Plant

  • Verdict: Fail
Report Card: How Much Progress Have Italy’s Populists Made?

The Ilva plant in southern Italy is one of Europe’s biggest and most polluting steel works. Pro-environment Five Star promised to block the sale of the plant to ArcelorMittal, agreed by the previous government, and either close the plant or turn it into a greener facility.

Once in power, the government realized it’s impossible to back out of the agreement with ArcelorMittal. The sale prompted a revolt by local supporters who accused Five Star of betraying them.

Adriatic Gas Pipeline

  • Verdict: Fail

Five Star also promised to block the construction of the Trans Adriatic Pipeline, a 4.5 billion-euro ($5.1 billion) gas connection linking the Caspian Sea to Europe via the tourist region of southern Apulia.

The party had to give up on this last month as well after a cost-benefit review. Prime Minister Giuseppe Conte said that halting works on the final stretch of the project could result in hundreds of millions of euros in losses.

Report Card: How Much Progress Have Italy’s Populists Made?

Demonstrators burned Five Star flags in street protests which are still continuing. But the announced 2020 timing for the first gas to flow might be also delayed by an ongoing investigation over alleged irregularities related to waste disposal.

Immigration

  • Verdict: Strong start

The League’s Matteo Salvini owes much of his political support to promises to curb immigration from across the Mediterranean.

Since taking power, the deputy prime minister has clashed with France, Spain and Malta in refusing to let several migrant rescue ships dock at Italian ports, consolidating his popularity in the short term at least.

He also spearheaded a decree on security and migration which won cabinet approval and the numbers of arrivals is down, though that trend had begun before the populists came to power and the longer term problems facing Italy and Europe remain.

©2018 Bloomberg L.P.