Italian Elections and Politics 2018: Yellow Tide

[jaichind]

For AFP

Breakthrough in Italy parliament as speakers chosen

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Looks like de facto deal between M5S and Cener-Right bloc to split the heads of the lower and upper house.

[jaichind]

Di Maio a few moments ago: "Talks with League are over; still deep differences with Democrats. Any discussion with Lega ends here. Salvini has condemned himself to irrelevance. Government with the CentreRight is no longer viable. I ask the PD to come to the table, not immediately to sign the contract but to check if there are the conditions to put it on its feet. If talks with PD fail, only alternative is a new election."

But if PD becomes a junior partner to M5S then I can see PD level of popular support falling over time as PD support will move to M5S or Center-Right bloc.  Of course if there is another election right away it would be a Center-Right bloc vs M5S choice election and PD would do worse but then they will live to fight another day in opposition.

[jaichind]

Extremely disappointing that M5S-Lega will not happen; still unclear to me why this is the case and who is to blame. Any ideas?

I think the experience of SPD in Germany has taught that any major party that becomes the junior partner in a ruling coalition always loses and continue to lose votes.  Both parties must have learned that lesson and would refuse to join a coalition unless they are the top dog.

[jaichind]

What Mattarella seem to propose is a 'Neutral' Government to rule until 2019.  He stressed that its leaders wouldn't be allowed to run in the election next year.  I guess what he is saying is another election in 2018 would be too disruptive.

[jaichind]

Italy's Populists Seek New Premier Amid Euro Warning

https://www.bloomberg.com/news/articles/2018-05-20/italy-s-populists-seek-new-premier-amid-french-warning-on-euro

Seems like  Florence University law professor Giuseppe Conte might be the candidate of the new ruling coalition.

[jaichind]

Will FdI be part of the government?  I assume FI will support it from the outside. 

[jaichind]

Not sure what Mattarella is up to.  In theory what he did is in accordance to the rules but it seems it merely mobilizes energy behind M5S and Lega.  I would be curious on what voting intentions look in polls after this set of events.  I suspect a surge of support for M5S and Lega and fall in support for PD and FI.

[jaichind]

I wonder if there will be a shift of alliances where M5S-Lega runs as allies in the next election versus a Lega-FI-FdI-NcI.

[jaichind]

Italy sovereign 5 year CDS surges to levels not seen since 2013.  I guess Mattarella was trapped.   He could accept Savona as finance minister but the resulting surge in Italy borrowing costs would create a situation where there will be an Italy exit from the Euro by proxy.  Or he could reject Savona and now he will get a surge in Italian borrowing costs anyway.   Worse for  Mattarella, now M5S and Lega will have the talking point of "Italians voters should decide the who will be in government and not the bond market."

Looks like we are headed for July elections.

[jaichind]

LA7 television cites increasing consensus among Italian lawmakers from different parties on early elections as soon as July 29 or Aug. 5.

[jaichind]

I think both sides are to blame for this mess:

M5S + Lega for being stubborn and presenting no alternative name to President Matarella for Finance Minister and insisting on their extreme candidate.

One can make the argument that for Lega, Matarella's move is a feature and not a bug and that Salvini's goal was always new elections to strength his position.

Salvini could have looked at the experience of Austrian FPÖ in the 1999-2006 period and Finland's Finns Party since 2015 and conclude a Right anti-European populist party loses support quickly if it goes into government as a junior ruling party.  If so Salvini could conclude that new elections is the real way out.  But Lega cannot be seen as the party that provoked a crisis ergo one had to be engineered with Matarella taking the fall by trapping him into a no-win situation.

[jaichind]

Devaluation, aka, free floating currencies, is market forces in action. Quantitative easing is not. Advocating floating currencies is simply not advocating quantitative easing no matter how hard you try to conflate the two. The Deutchmark isn't rising relative to the Lira simply because there was a political decision to call the German currency the "Euro" and the Italian currency the "Euro" and then declare the two currencies of equal value in perpetuity. Fixed exchange rates are anti-market, as is quantitative easing.

Totally agreed.  I think the issue here is not an issue of floating currencies but what is the relationship between Germany and Italy.  If the population and elites of both states sees a common fate like what we have in USA between different states, then a common currency would make sense.  If the view of each other is of a foreign entity then issues like "the EUR rates benefits Germany at the expense of Italy" will crop up.  Note in USA there is usually not talk of "the current monetary policy is for the benefit of TX and hurts NY" because people do not think of cost-benefit in those lines.  If Italians and Germans do think along those lines then perhaps a separate currency is best. I guess the main problem here is German and Italian elites think in common fate terms but not a significant section of the general population. 

[jaichind]

What if Salvini's secret mission isn't to stay in the Euro or not to stay in the Euro, but to win the next elections? The League is already polling in the 20-30% range. When Salvini saw that Mattarella would reject any government including Savona because "the financial markets...", he saw the opportunity for electoral gain. I don't of course deny that it's a gamble; and by that I mean a gamble at the cost of his would-be coalition partners and in the first place a gamble at the cost of the Italians and Europeans.

That is what I suspect is his real goal.

[jaichind]

It seems M5S is willing to try again with Lega to form a government.  Lega does not seem to be interested and seems determined to push for early elections.  One way out is for M5S-PD to form a government.  But that just means Lega will win a even larger vote share next election. 

[jaichind]

League, Five Star Reach Agreement on Savona Role: La Stampa
(Bloomberg) -- Italy’s populist parties -- League and Five Star -- reach deal which would see Paolo Savona serve as minister of European affairs, La Stampa reports, citing anonymous sources.