Italy Regional Vote Could Fuel Tension in Unruly Coalition

(Bloomberg) -- Italian voters go to the polls Sunday and Monday in regional elections that could weaken the year-old coalition of Prime Minister Giuseppe Conte as it struggles to pull the country out of the worst recession in living memory.

Seven of the nation’s 20 regions will choose new legislatures, in addition to mayoral elections across the country and a nationwide referendum on reducing the size of the country’s parliament.

Cutting the number of lawmakers is a core platform plank for the anti-establishment Five Star Movement, the biggest force in the ruling alliance that also includes the center-left Democratic Party.

Read More: As Conte Faces Italy Vote, EU Cash is Key to His Survival

Turnout was 30% as of 7 p.m. on Sunday, according to data on the Interior Ministry’s website. Exit polls are due when polling stations close at 3 p.m. on Monday, with referendum and regional results expected in the afternoon and evening.

What to Watch

The focus is on three of the regions held by the center-left: Tuscany, Marche in central Italy and Puglia in the south. Matteo Salvini of the anti-migrant League, which leads the center-right opposition, is seeking a landmark victory in Tuscany, a long-time leftist bastion.

Salvini is in need of a win. With about 25% in national opinion surveys, the League is still Italy’s most popular party, but it’s support has been steadily sliding since the 2019 European elections, when it won 34% of the vote.

Fueling Tensions

A center-right win in Tuscany and in other regions could also fuel tensions both within Five Star and the Democrats, or PD, and between the coalition partners. That could prove a headache for Conte, with a government reshuffle possible.

Cabinet members potentially at risk include Transportation Minister Paola De Micheli of the PD, who’s been locked in acrimonious talks with the Benetton family’s infrastructure giant Atlantia SpA after the deadly 2018 collapse of a bridge in Genoa.

A dismal PD showing could also torpedo Nicola Zingaretti’s leadership of the party, further unsettling the government.

Brussels Windfall

Whatever their misgivings, Conte’s allies are likely to prefer to remain in power rather than risk triggering early elections. They are looking forward to reaping the political benefits from carving up Italy’s expected 209 billion-euro ($248 billion) slice of pandemic recovery grants and loans from the European Union.

Some Conte loyalists are more worried about how to deal with the cash than about the regional elections, according to a senior official familiar with their conversations. If the government is seen as wasting money, or pursuing policies based on party or ministry chiefs’ egos, Italians may turn their backs on the ruling parties for years to come, said the official, who asked not to be named discussing a confidential issue.

Downsizing Lawmakers

The stability of Conte’s coalition rides in part on the outcome of the referendum, which calls for cutting the number of seats in parliament from 945 to 600. Passage of the measure could be an insurance policy for the premier, dispelling any risk of early elections as lawmakers redraw constituencies and negotiate electoral reforms.

A “no” vote on the referendum would damage Five Star, which is already hemorrhaging voter support, though other parties, including the PD, have backed the measure as well.

Despite the country’s volatile politics and likely budget disputes ahead, investors have signaled they’re sticking with Italy’s debt, reassured by the fiscal and monetary firepower of the EU and the European Central Bank shielding the country’s bond market.

©2020 Bloomberg L.P.