The Tunnel, the Hut and the Face-Off Menacing Italy’s Coalition

(Bloomberg) -- You can trace the rise of Italy’s Five Star Movement to a break-in at a ramshackle Alpine hut near the French border.

In 2010, Five Star’s founder, the comic Beppe Grillo, stormed the outpost at a work site in the mountainous Val di Susa with a band of supporters to protest plans for a high-speed rail tunnel through the Alps to France.

Today, Five Star is no longer just a bunch of scrappy insurgents led by a comedian. It makes up half of Italy’s populist coalition and the tunnel project, known as TAV, has advanced too. The government is due to release a viability report in the coming weeks, which will start the clock ticking on a final decision. And that is proving a major headache for Five Star.

The Tunnel, the Hut and the Face-Off Menacing Italy’s Coalition

After caving in on two major promises to supporters in just seven months in power, the Movement desperately needs a political win. Many of its voters say green policies are the most important issue to them, so the party’s credibility could be on the line.

“The TAV protest is one of Five Star’s original battles, it has very strong symbolic value for the party,” said Lorenzo Pregliasco, a political analyst at Agenzia Quorum which manages pollster “I see a strong risk that their traditional environmentalist voter base will be disappointed.”

The Tunnel, the Hut and the Face-Off Menacing Italy’s Coalition

Grillo was sentenced to prison for the stunt in Val di Susa, though he ultimately avoided incarceration. Still, the experience gave him material for his burgeoning blog and sold-out live appearances, where he railed against what he saw as the Italian establishment’s corrupt contract-bidding and disregard for the environment.

Eight years later, Five Star surged to unexpected heights in the March elections—garnering the most votes, partly on the back of its environmentalist credentials—and improbably joined forces with Matteo Salvini’s League to form a populist government.

Just one problem. The League, unlike Five Star, isn’t convinced the environment is a top priority. Salvini and company get their strongest support from the business and industrial community in the north, which backs infrastructure projects and tends to chafe at regulations that get in their way.

Worse, in the push and pull that’s come to characterize the Five Star-League cohabitation, the League has consistently come out on top, nowhere more so than on the environment.

The Tunnel, the Hut and the Face-Off Menacing Italy’s Coalition

Five Star gave in on a plan to allow the completion of a gas pipeline across the Adriatic, despite making opposition to the project a centerpiece of its election platform. Strike one. The Movement then backed down on a pledge to close a toxic steel plant in the southern region of Puglia, another core campaign promise. Strike two. Some hardcore Five Star members now say the party can’t survive a third climb-down.

Capitulation on TAV would be costly politically for Five Star, but backing out of the project, which began in 2001, would be just plain costly. With contracts already signed for the next round of works, walking away now would leave Italy on the hook for 2 billion euros ($2.31 billion), according to TAV administrators. And while Five Star might be willing to pay that price to avoid losing face, the League is certainly not.

The Tunnel, the Hut and the Face-Off Menacing Italy’s Coalition

The League is under pressure to green-light TAV, as supporters argue the link will boost trade between the industrial centers of Turin and Lyon and funnel business to local entrepreneurs who’ve been battered by Italy’s economic crisis. With his party surging in the polls, Salvini has even mooted the idea of a referendum to decide the issue. League lawmakers took part in a pro-TAV demonstration Jan. 12 in Turin, though Salvini did not appear.

The government-commissioned cost-benefit analysis could offer a ray of hope for Five Star, as the final report will say the project isn’t economically viable, according to two people familiar with the situation. Still, most experts expect the project to go ahead.

Another study sets the cost of halting the project even higher—at least 3 billion euros, newspaper Corriere della Sera reported, saying the government may take a stand against the plan, then say it was “forced” to go ahead because of legal and EU obligations.

In the meantime, the row between the coalition partners risks turning the project into a loss-making machine, with project delays jeopardizing millions of euros in European Union funding. The Telt company building the link has frozen all tenders awaiting a final decision, according to a person familiar with the matter.

The EU has already approved more than 800 million euros of funding for the project, some of which could be lost if tenders remain frozen. The person said about 75 million euros a month could be lost in productivity because of the government’s indecision and bickering.

The Tunnel, the Hut and the Face-Off Menacing Italy’s Coalition

For Val di Susa residents, the battle over the TAV has become a way of life, and in the valley it sometimes seems like the actual outcome is beside the point. A yearly summer camp organized by TAV protesters features soccer games and barbecues—though attacks on the project site are also a tradition.

Anyone hoping for a pilgrimage to the famous hut, however, will be disappointed. Though still standing near the tunnel works, the structure is off-limits. Local police are on the watch for Grillo fans who might get too close, and valley residents prefer to steer clear of the controversy.

A banner at a Susa coffee shop may best sum up local sentiment: “Here the sun shines, we sell good wine, but we don’t talk about politics.”

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