Salvini May Soar in Polls But His Takeover of Italy Hit a Snag
Salvini May Soar in Polls But His Takeover of Italy Hit a Snag
(Bloomberg) -- For all his seemingly unstoppable climb in the polls, Matteo Salvini’s campaign to radically change Italy hit a few snags this week.
The deputy premier and de facto leader of the country’s populist government promised a “fiscal shock” with radical tax cuts next year to jump-start the economy. To make that happen, he was counting on fresh faces at the European Union to steer Brussels bureaucracy away from the doctrine of fiscal prudence that he and fellow populists loathe.
Instead, he now has to reckon with a traditional Franco-German duo leading Europe’s biggest institutions. Adding to complications, his finance minister Giovanni Tria made fresh budget commitments to avoid an EU sanction that will probably curtail his ambition to slash taxes. And to top it off, European lawmakers elected a member of the opposition Democratic Party as their head -- the only prize Italy was able to snatch after a frantic week of horsetrading for top EU jobs between the bloc’s leaders.
A discussion on regional autonomy, one of Salvini’s key electoral promises, was postponed again during a ministers meeting Wednesday evening.
Even on immigration, the issue that propelled him to a resounding victory in European elections in May, he has had a setback. Carola Rackete, the 31-year-old German captain of a charity ship that rescued dozens of migrants stranded in the Mediterranean, defied Salvini and entered the port of Lampedusa, where they eventually disembarked. She was arrested but, to the interior minister’s ire, freed just two days later.
Soaring Appeal
The events of the past few days are probably just a temporary upset for Salvini. His popularity in Italy shows no signs of abating. His League party climbed to 38% in a poll this week, within shooting distance of the 40% that would allow him to claim a majority in Parliament without the need to build alliances.
But those events also show that Prime Minister Giuseppe Conte and Finance Minister Tria’s efforts to hem in the populist leader’s most disruptive ambitions are having at least partial success.
Concessions on the budget that allowed Italy to defuse the threat of disciplinary action for excessive debt from the European Commission might turn out to be particularly significant. Tria not only committed to 7.6 billion euros ($8.6 billion) in spending cuts and extra savings to bring the 2019 deficit in line with EU demands, he also promised to stick to the same course for next year -- even if he was careful to keep his words vague.
In sharp contrast, Salvini has vowed that Italy won’t submit to further commitments for 2020. His promised “fiscal shock” is forecast to cost between 10 to 15 billion euros, on top of the 23 billion euros needed to offset an automatic VAT increase. How Tria will come up with the money, and how much he will have to bend to Salvini’s demands even if it means flouting the truce with Brussels, will probably dominate Italian politics this fall.
Another point of contention might be the choice of a candidate for the Executive Board of the European Central Bank, where Italy risks having no representative for the first time since the euro’s birth.
For now, though, markets are helping. Italian benchmark 10-year government yields sank to a 32-month low as Italy avoided a EU deficit procedure, giving the populist coalition respite.
“Salvini will have less room to blame the EU for being the institution that does not allow Italy to reform and grow, and this rhetoric will be weakened," said Lorenzo Pregliasco, a political analyst and founder of consultancy YouTrend. "But for Salvini and Di Maio it would have been almost impossible to introduce costly measures in the advent of an infringement procedure. Salvini will try and push the boundaries as much as he can on the flat tax."
In Brussels, the selection of a German as Commission President and of a French national to head the European Central Bank was announced just hours after Salvini said "the future of Europe should not be decided only between Berlin and Paris.” He had also asked for a commission chief who’d be ready to change the EU’s budget rules.
Conte eventually supported a deal between EU leaders that also saw Ursula von der Leyen, a close ally of German Chancellor Angela Merkel, nominated to lead the EU’s executive arm. The compromise found only lukewarm praise from Salvini, who was forced to issue a statement reiterating his demands for an overhaul in Brussels “regardless” of those chosen as the bloc’s new leaders.
As the premier was negotiating in Brussels, Salvini took to social media a dozen times to comment on everything from migration to Italy’s low birth rate -- “the real crisis the country is facing" -- to the use of electric guns by police.
“Salvini has been distracted by the clash with SeaWatch captain Carola, but migration remains his clash point with the European Union,” said Vincenzo Longo, analyst at IG Markets in Milan. On the budget front, he warned, the reprieve for Italy is only temporary and “we should expect tensions to bubble up again after the summer.”
--With assistance from Samuel Dodge and Lorenzo Totaro.
To contact the reporters on this story: Alessandro Speciale in Rome at aspeciale@bloomberg.net;Chiara Albanese in Rome at calbanese10@bloomberg.net
To contact the editors responsible for this story: Chad Thomas at cthomas16@bloomberg.net, Caroline Alexander, Marco Bertacche
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