The seemingly inevitable victory in the legislative elections in Italy of Giorgia Meloni, leader of the post-fascist Fratelli d’Italia party, is of the utmost concern to the markets and to Brussels, which fears a stir due to her Eurosceptic rhetoric and the soaring cost of the country’s huge debt.
She may have displayed her desire to break with a cumbersome past and bury her dream of seeing Italy leave the euro, concerns persist, especially since she has just reiterated her support for the Hungarian regime led by the ultranationalist Viktor Orban.
“I don’t know any sovereignists who are not anti-European institutions. So what they say today doesn’t matter,” he said. the Vice-President of the European Commission Frans Timmermans in early September in an interview with the newspaper La Repubblica.
If Giorgia Meloni now asserts herself as “pro-European”, she changed her tone during an electoral meeting in mid-September in Milan: “the party is over”, Italy “will begin to defend its national interests” with of Brussels, ‘as the others do’.
Renegotiate the recovery plan
Well placed to become the next Prime Minister, the pasionaria of the Italian right militates for a “confederal Europe” which “respects the sovereignty of the Member States” by leaving it to them to decide on the “policy of proximity” directly concerning the citizens.
With this in mind, it calls for the renegotiation of the Italian post-Covid recovery plan, financed to the tune of nearly 200 billion euros by Europe, to take into account the surge in energy costs in the wake of the war in Ukraine.
However, the disbursement of funds is linked to a series of reforms whose implementation was scrupulously respected by the outgoing government of Mario Draghi and which now seem to be compromised.
“We could end up with a serious conflict of ideas between Italy, which is by far the biggest beneficiary of the recovery plan, and the EU,” fears Nicola Nobile of the firm Oxford Economics.
“There are a lot of risks, but it will all depend on which Meloni will lead the government, the one who has attacked Europe in the past or the one who now advocates a more moderate approach and could continue the status quo on budgetary matters”, comments he told AFP.
Worries over a slackening in the implementation of reforms and a slippage in public debt after Sunday’s elections have already led the rating agencies Standard & Poor’s and Moody’s to downgrade the outlook linked to the country’s credit rating.
Italy is crumbling under a debt of more than 2,700 billion euros, or some 150% of GDP, the highest ratio in the euro zone behind Greece.
Unsurprisingly, the right-wing coalition is calling for a “revision of the rules of the Stability Pact”, suspended due to the health crisis, which set a ceiling of 3% of GDP for the deficit and 60% for the debt.
If it is legitimate to relax certain criteria deemed obsolete, “it would be politically suicidal to make fun of all the existing rules”, warns Peter Bofinger, professor of economics at the University of Würzburg.
“If Italy deviates from the European consensus” and does not respect a minimum of budgetary discipline, “even the European Central Bank will not be able to help it,” he told AFP.
The electoral promises of the coalition between Fratelli d’Italia, the Anti-Immigration League of Matteo Salvini and Forza Italia of the conservative Silvio Berlusconi could have a harmful effect on public accounts.
“Their program is very vague and does not explain how to finance these measures,” says Nicola Nobile. If they were fully implemented, the public deficit would exceed 6% of GDP for the next five years, “pushing the already high public debt to unsustainable levels”, according to Oxford Economics.
The flagship measure, a flat tax, ie 15% for the League and 23% for Forza Italia, could cost between 20 and 58 billion euros, according to the Observatory of Italian public accounts. Added to this are other tax cuts, “fiscal peace” measures (amnesties) and an increase in the minimum pension.
Investors fear that such a populist government will end up like its predecessors: that of Silvio Berlusconi had to resign in 2011, under pressure from the markets and a surge in the cost of debt.