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Salvini Bet It All. Then He Lost.
Italy's Prime Minister Giuseppe Conte resigned last week, deepening the government crisis. But a last minute deal with Salvini's former coalition partner 5-Star Movement and centre-left Democratic Party PD dashed Salvini's hopes for a snap election – helping stabilise an already shaky market.
B. Lana Guggenheim August 29, 2019
Deputy PM Matteo Salvini. Copyright: Stefano Guidi / shutterstock.com
Matteo Salvini had a wish.
One week ago, Italian Prime Minister Giuseppe Conte resigned, bringing Italy's slow-rolling political uncertainty into an outright crisis. Italy's President, Sergio Mattarella, kicked off negotiations between existing members of Parliament, attempting to hammer out a new governing coalition. Parliament had until the end of the day to decide whether they could cobble together a new majority. If not, new elections would be held; something Deputy Prime Minister and League Party head Salvini had been counting on – leveraging his 40 percent polling popularity – to seize power and ultimately become Italy's next prime minister.
Instead, 5-Star Movement and the Democratic Party clinched a last-minute co-governing deal, leaving Salvini out in the cold.
During his resignation speech last week, Conte slammed Salvini's tendency to play politics rather than govern, stating "Letting citizens vote is the essence of democracy, but making them vote every year is irresponsible."
The timing of Italy's political swing has been crucial. The country needs to submit a draft of its 2020 budget to the EU Commission soon, and snap elections in the midst of this could make an already difficult task monstrously complicated. If a budget is neither submitted nor accepted, Italy will be hit with major VAT tax hikes come January to ensure it remains in line with EU fiscal law.
Snap elections would also be bad for global markets. Italy is the eurozone's third-largest economy, worth more than 11 percent of the EU's total economy, but it's in a fragile state. Only Greece carries more debt, but the Italian economy is simply too big to bail out should things go wrong – a possibility, according to experts, that could trigger a major financial crisis instead.
Salvini supporters outside of Palazzo Madama, Rome, on August 20th. Copyright: Cineberg / shutterstock.com
Complicating matters further, the past fourteen months have lacked focus on strengthening Italy's financial institutions. Salvini pushed tax cuts and a culture war against migrants, while Di Maio prioritised welfare spending aimed at the poorest residents and reforming Italy's political system.
When Salvini pulled the plug on the government, the market remained steady, with investors taking a "wait and see" approach.
Now that the dust has settled and a larger crisis has been effectively averted, markets have recovered. On Tuesday, Italy's 10-year bond yield dropped to a 1.143 percent, which is the lowest it's been in the past three years.
An Unlikely Alliance?
Anti-establishment party and former Salvini coalition partner 5-Star Movement managed to seal their negotiations with the centre-left Democratic Party (PD), but it's been a rocky road. Disagreements between the parties were myriad, ranging from policy and who would head which ministry to who would be prime minister – along with facing their own internal divisions. 5-Stars wanted (and in the end, got) Conte to retain the role, but PD preferred someone new for the position.
Even if they make their coalition work, an unpopular alliance may just hand Salvini his long-sought victory in the long-run, especially if he inhabits the role of opposition leader and remains locked out of the government.
Indeed, Salvini's allies rallied at protests around Italy as the alliance cemented. "A government made up of 5-Star and the Democrats will not correspond to the sentiment of the people", said Salvini.
"Let's hope that if a Democratic Party-Five Star government is formed, the people will rise up as soon as possible", said Alessandra Locatelli, a League minister. Giorgia Meloni, the head of Brothers of Italy, a nationalist right-wing party, condemned the joint Democratic Party-Five Star government, saying that it was contrary to the votes of millions of Italians. "They're stealing the government by preventing Italians from going to a vote", she said in a video address on Twitter.
Salvini has not called for additional protests since the new coalition was formed.
While the markets and the EU breathe a sigh of relief over these developments, it is clear that Salvini's life in politics is far from over. And yet, Salvini may have learned a lesson as well: populist rhetoric might win elections, and elections might give you power, for a time – but that still won't guarantee your place in government. You must govern too.
5-Stars Bonds Budget coalition Democratic Party Elections EU Giuseppe Conte Italy League Luigi Di Maio markets Matteo Salvini snap elections VAT tax
B. Lana Guggenheim
Lana is a freelance journalist based in New York City. She has a M.Sc. in International Conflict from the London School of Economics and Political Science. She has worked as an analyst, reporter, and editor, covering extremism, culture, economics, and democracy.
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