In a second attempt, Giuseppe Conte managed to become Italy’s new prime minister and to form a government that was both approved by President Mattarella as well as the two chambers of the Italian parliament.
In the Senate, the populist Five-Star-Movement (M5S) of Luigi Di Maio (*1986) controls 109 seats, and the right-wing, anti-immigration, populist Lega of Matteo Salvini (*1973) 58 seats. The new coalition needed 145 parliamentarians to win the vote of confidence. In the end, on June 5, they even got 171 votes, more than their coalition controls. 117 Senators voted against the new government, 25 abstained from voting.
On June 6, in the 630-member Chamber of Deputies, the new, so-called “government of change” won the vote of confidence with 350 yes against 236 no, with 35 abstentions. In the 2018 Chamber election, the Five-Star-Movement won 222 seats, the Lega 125.
The new, populist government willl not respect the Maastricht criteria. Why? The coalition treaty is a mix of partly contradictory policies wanted by the M5S and the Lega. The Lega pushed through its flat tax plan (taxes of 15% and 20% for corporations and individuals). Per se, this would not be a disaster in the sense that a tax reform was needed. Italy’s taxes are far too high. The result are tax evasion and a strong shadow economy.
However, if you lower taxes, you should increase revenue in another way and/or curb spending. Instead, the new coalition wants to implement the M5S plan of a basic income and plans to undo the Fornero pension reform. This would mean lowering the retirement age and offer higher pensions.
You cannot at the same time lower taxes and increase wellfare spending and think you can respect the Maastricht treaty. Italy’s public debt already stands at 132% of GDP. With the new policies outlined, the deficit risks to exceed 3% of GDP in the future.
In addition, Matteo Salvini and Luigi Di Maio have alredy publicly announced that they will not increase the Value Added Tax. They have no plans to present a balanced budget. In short, they have no intention to respect the Maastricht treaty.
In his inaugural speech, the new Prime Minister Conte said that his government was indeed populist and anti-system in the sense that his coalition would listen to the needs of the people and would remove old privileges and encrusted power. He was right in the sense that the governments of the past decades have all failed to improve Italy’s situation.
He forgot to mention the fine print, that is that his “government of change”, with the plans outlined above, risks to make a pre-existing, bad situation worse. In a worst case scenario, the new, populist, anti-establishment government could trigger a world economic crisis. Di Maio, Salvini and their “independent” Prime Minister Conte will need a quick learning curve to avoid such a scenario.
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