Italy: Keeping 5Star Out of Government

Published on October 12, 2017

The Italian Parliament is in the final stages of debating a new electoral law, the so-called “Rosatellum bis,” a mix of a proportional and first-past-the-post electoral system for both the Chamber of Deputies and the Senate, with the Senate’s constituencies based on regional, and not national, partitioning. Compared to a previous version, which failed to get Parliament’s approval last June, the Rosatellum bis crucially also allows parties to form and run on coalitions – mainly in order to win first-past-the-post seats.

*** The provision is specifically aimed at stopping the 5Star Movement, the only party that is required by its own statute to run on its own, and at taming far-right and far-left parties who will now have to choose to either become part of a coalition or disappear. The odds of swift passage are very high. ***

*** And we believe there is a very strong chance, if this proposal turns into law as we expect, that the current political landscape of a wide, centrist coalition of mainstream parties could well be replicated after the spring 2018 vote – with the 5Star firmly left out in the opposition. The future majority coalition’s balance of power – whether center-left or center-right – will depend on the relative performance of Italy’s two major mainstream parties, Forza Italia and the Democratic Party, but it will include at least one of them, and in any event chances of extreme outcomes will be greatly reduced. ***

Stacking the Decks

The approval of a new electoral law has been in theory a priority for the Italian Parliament since former Prime Minister Matteo Renzi’s defeat in the December 4, 2016 constitutional referendum.

Cross-party vetoes, however, made it impossible to push a proposal through before June of this year, and an initial plan to create a mixed proportional and first-past-the-post system was rejected by the Parliament. While there was broad agreement on the law, we believe the plan blew up in part because many MPs were eager not to dissolve Parliament before September 2017 in order to be able to claim their pensions. That is now behind us.

This new draft law sets up a number of seats, around 35% for both the Senate and the Chamber of Deputies, which will be assigned through first-past-the-post races. The remaining number of seats will be assigned proportionally. But the new legislation’s truly game-changing feature, compared to the June version, is that there is now the possibility to form and run on coalitions – which is key to increasing chances to win the first-past-the-post seats. Of course it just so happens that the 5Star Movement is not allowed to enter into electoral agreements with other parties, who would not have them anyway, and they will therefore be put now at clear disadvantage.

The law will also have the effect of marginalizing small parties such as the newly created Movement for a Popular Democracy of former PD leader Pierluigi Bersani, and far-right Fratelli d’Italia, who will now be urged to join larger coalitions or else be left fighting for crumbs.

All in all, the law has been created to favor the two mainstream parties, the PD and Forza Italia, plus the Northern League with its strong territorial strength in northern Italy.

Come election day, from what we can see now, the law is likely to yield yet again an inconclusive result as neither the Democratic Party – which is likely to run together with a small faction of the far-left led by former Milan mayor Giuliano Pisapia – nor Forza Italia, together with the Northern League, are projected to win an absolute majority. But the law’s main objective is not so much to ensure the formation of a stable government, but, brutally speaking, to kill the 5Star’s attempts at climbing to power.

And that seems like an achievable goal. Barring any surprises, according to some rough calculations, the 5Star would need to win around 40% of the votes to have a credible shot at an absolute majority – and that is without even considering the volatility of the Senate outcome.

Possible Elections Outcomes

With this law in place, next spring’s vote is likely to result in a wide combination of possible government coalitions, all of them, however, poised to be firmly anchored in the center, with little space for populist programs.

With a strong PD and a relatively weak Forza Italia, we think the result could well closely replicate the current status quo. The current Prime Minister Paolo Gentiloni, who stepped in as essentially an interim choice after the spectacular fall of Renzi, has done well, and could be confirmed. Many on the right and left alike praise his soft-spoken approach, and they see him as a safe, if not perhaps pliable, pair of hands. An alternative being considered is current Economy Minister Carlo Calenda, but he is, among other things, not highly regarded by the Vatican.

If Forza Italia and the Northern League run together, and do particularly well, there is the chance of a center-right led government, which we expect would then likely be headed by current European Parliament President Antonio Tajani, an obvious favorite of EU partners and particularly of German Chancellor Angela Merkel. Markets would undoubtedly be pleased with that outcome.

That is not to completely rule out 5Star’s Luigi Di Maio’s chances of becoming Prime Minister, but his chances are slim. And in any case he was recently forced to make a prudent turn to the center in order to reassure Italian voters and business leaders alike. In addition, most of 5Star’s European Union-related policy priorities are still unclear, both among its own Brussels elected officials – who months ago for instance asked to be admitted to the pro-European ALDE group in the European Parliament – and within the party leadership itself. We would not be surprised to see the Movement further mellow its anti-euro and anti-EU positions as we approach the vote, especially if the Italian economy keeps growing at a decent (for Italy) pace, and with the eurocrisis now officially in the rearview mirror.

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