Matteo Salvini, Italy's deputy prime minister, left, gestures as Giuseppe Conte, Italy's prime minister, addresses the Senate in Rome, Italy, on Tuesday, Aug. 20, 2019. Salvini dangled the prospect of tax cuts and a boost in government spending for Italians in a final push to force new elections that could secure him the premiership. Photographer: Alessia Pierdomenico/Bloomberg
Matteo Salvini, left, leader of the League party, reacts to the resignation speech of Italy's prime minister Giuseppe Conte, right © Bloomberg

Italy’s far-right and anti-establishment coalition government has collapsed after 14 months of chaos and contradiction. Few in Italy or elsewhere in Europe will mourn the passing of such a dysfunctional administration. But its demise, opportunistically triggered by Matteo Salvini, the leader of the anti-immigrant and Eurosceptic League, thrusts the country into a fresh political crisis at a time of deep social and economic problems. Seldom has Italy’s political drama seemed so detached from reality.

It is now up to President Sergio Mattarella to find a way out of the crisis. He wants to move quickly. Italy can ill-afford lengthy deliberations and a game of political egos. Rome has to submit a fiscal outline for 2020 to the EU by mid-October and enact a full budget by the end of the year. The economy is stagnating and could tip into a recession if the political uncertainty persists and automatic tax rises come into effect in January. But snap elections would probably install a hard-right government intent on a bust-up with Brussels over tax cuts.

Of the various options for Mr Mattarella to consider, the worst would be to resuscitate the tie-up between the League and the anti-establishment Five Star. Mr Salvini has hinted that he is open to a new start. But it is hard to see how the yawning policy differences between the two parties could be bridged or how the far-right leader could be stopped from jumping ship at the next opportunity.

A better way out would be a coalition of Five Star and the centre-left Democratic party. It was unthinkable only a month ago — one reason why Mr Salvini felt he could pull the plug on the government. If there is a lot of bad blood between Five Star and the Democrats both have an interest in forestalling early elections, where they could sustain heavy losses. Thanks to Mr Salvini’s timing, they can claim to be acting in the nation’s interest given the urgency of passing a budget this autumn and avoiding a confrontation with the EU.

On Wednesday, Nicola Zingaretti, the Democrats’ leader who had been strongly opposed to a coalition with Five Star, said he was open to talks subject to conditions, including: “loyal membership” of the EU, economic development based on environmental sustainability, a new approach to migrant inflows and avoiding an increase in the tax burden. Turning sensible principles like these into a detailed coalition programme will be tough; holding a coalition together will be a struggle. It might last long enough to steer through a new budget.

By pushing the League, Italy’s most popular party, into opposition the risk is that a Five Star-Democratic party coalition plays into Mr Salvini’s hands. He is already presenting it as a denial of democracy even if it was his failed gambit that brought it about.

Becoming prime minister would force Mr Salvini to make choices and assume responsibility for them, rather than hiding behind his allies. But many Italians, not to mention their EU partners, look at the prospect of the first government led by the far-right in Europe since the second world war with dread. Mr Salvini’s Eurosceptic, anti-immigrant speech in the Senate marking the downfall of his government suggests he is not about to moderate any time soon. His promise of a €50bn package of tax cuts to stimulate the economy in breach of EU fiscal rules would put Italy on collision course with Brussels and push up its borrowing costs. Italy’s economy needs a lift. It also needs a plan to raise its growth potential. Mr Salvini can deliver neither.

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