Italian Election: The Two Populist Parties Should Try to Govern

(Bloomberg View) -- Italy’s election results pose a major challenge for the country and the rest of the European Union. The vote resulted in a hung parliament and saw the rise of two anti-establishment parties: the League and the Five Star Movement. The economic policies of these two parties -- which include deep tax cuts and lavish spending pledges -- would add to Italy’s enormous public debt and put Rome on a collision course with its European allies.

This presents Italy’s mainstream forces, and in particular the center-left Democratic Party (PD), with a major dilemma. The PD lost the elections badly, but it has enough seats to form a government either with the Five Star Movement or with the center-right coalition, including the League and Silvio Berlusconi’s Forza Italia. Having the PD in government has two advantages: It would dilute the programs of the two radical parties, and prevent a “coalition of chaos” between the League and Five Star. At a time of great uncertainty, these are no small feats.

This plan would only provide a short-term fix, however. And it could end up destroying PD’s chances of an electoral resurgence for a long time to come.

As the experiences of the Liberal Democrats in Britain and of the Social Democrats in Germany show, junior partners tend to be crushed in a coalition. And this would not be a normal alliance: The Five Star Movement and the League relentlessly attacked the Democratic Party during the electoral campaign. Their policies -- including for example dismantling Italy’s recent pension reform -- directly conflict with the PD’s ideas. It’s little wonder many PD politicians are vocally opposed to such a pact.

Italy’s mainstream parties would do better to skip a turn. They already have much to worry about. Matteo Renzi, the leader of the Democrats, is stepping down after a catastrophic defeat. The center-left has to find a new leader, who can make the party electable again. The Democrats also need to think about a new program: Italy’s most deprived areas have warmed to the promises of the Five Star Movement, which was the largest vote-winner in the poorer south of the country. The center-left must find a way to regain their support, which is also compatible with their greater commitment to sustainable public finances.

Now it is up to the Five Star Movement and the League to try to form an alliance, if they can. A coalition between Five Star and the League would be representative of what most Italians have voted for. More than 50 percent of voters have backed political parties which are skeptical of the EU and of globalization. It is only fair these forces get a chance to implement their ideas.

And yet, this is easier said than done. Five Star’s promise of generous income support won it support across the country, but particularly in the south. The League won most of its votes in the wealthier, more commercial north, which liked its pledges of a flat tax. It is hard to see how the League’s northern supporters could live with greater public spending mainly directed at the south. Furthermore, while the German coalition agreement was the result of a painstaking negotiation, committed to paper and binding on the parties, an Italian coalition follows no such conventions. It would likely stumble from political roadblock to political roadblock, with voters given little warning of policy direction.

Still, an anti-establishment government would, at least, finally put these parties to the test. For years, the League and Five Star have had the luxury of being in opposition: They were able to criticize the government and the EU, which proved popular in a country that went through a major economic crisis, but were not held responsible for policies themselves. Their plans were vague and subject to little scrutiny. For example, they want the rest of the euro zone to let Italy spend more, but it’s not clear why fiscally conservative countries such as Germany would agree. Where Five Star won control of local administrations, as in Rome, its record has drawn much criticism.

If it proves impossible to form a new government, Italy will face a new round of elections, perhaps as soon as this year. That will prolong the uncertainty, and there’s no guarantee of a different outcome (though parties could agree on a new electoral law which makes it easier to have a winner). But the time would not have been wasted: The PD will have had time to do some real soul-searching. And Five Star and the League will have learned that forming a government -- let alone governing -- is a lot harder than electioneering.

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

Ferdinando Giugliano writes columns and editorials on European economics for Bloomberg View. He is also an economics columnist for La Repubblica and was a member of the editorial board of the Financial Times. 

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