Italy’s new government and the Eurozone

On Saturday 22nd October following another set of early elections in Italy, a government consisting of four right-wing political parties was sworn into office. The leader is Giorgia Meloni, leader of the far-right Fratelli d’Italia, a party that emerged from the neo-fascist movements of the 70s and 80s.

Meloni is Italy’s first female Prime Minister and first from the far-right since Mussolini. She is relatively untested who was previously a fringe figure. In the last election her party only got 4% of the vote. She replaced as PM the scion of EU respectability Mario Draghi, former president of the European Central Bank. 

Meloni has in the past been disparaging about the EU’s institutions, the Euro currency and Italy’s place in Europe in general. She’s threatened to re-open old wounds and caused fear that she may attempt to negotiate once previously thought closed financial agreements.

Her election whilst remarkable, at present hasn’t sent the shockwaves across the Eurozone that you might expect. This is in a large part due to the fact that the markets and political elites had factored in this result for the preceding few months. 

Let’s first take a look at how Italy got here in the first place before going on to look at who the new government is made up of and what we can expect in the short, medium and long term.

Posters for election candidates in Tuscany

Alexmar983, CC BY-SA 4.0, via Wikimedia Commons

Why did Italy have early elections?

Italy has a reputation for its political instability. In the years since the Second World War it has seen over 70 different governments led by over 30 different Prime Ministers. Dominant personalities have always loomed large (think Berlusconi) and the electoral system means broad coalitions are a fact of life.

Since the Eurozone crisis of 2011, Italy has seen a multitude of governments of all shapes and sizes, often led by ‘technocratic’ ministers who haven’t sat in parliament. Names like Mario Monti, Giuseppe Conte and Mario Draghi have all been PM’s without a seat in the lower house. They all have led technocratic governments backed by broad coalitions.

In 2021, a new technocratic government supported by all the major parties and led by Mario Draghi was sworn in. This government was empowered to get Italy through the ongoing social and economic crisis caused by the Covid-19 pandemic. In theory it could have been in place until 2023 however one of the three key supporting parties, the 5 star movement, pulled their support. Draghi stated he couldn’t lead unless all major parties backed him and thus the government fell and elections were called.

Why did Meloni win and who are the people that make up the new Government?

In the 2018 election, Meloni’s FdI party got just 4% of the vote. This translated into just 32 seats (compared to the largest party with over 200.) The FdL though was the ‘largest’ party to vote against the installation of the technocratic Draghi government.

This meant that Meloni was in effect the de-facto leader of the opposition and was thus able to gain large amounts of media exposure.

In the election the FdI was one of the only parties to gain seats, which they picked up from across the spectrum including from her supposed allies on the right. She formed a coalition with 3 other parties on the right going into the election and when the results were announced, the right-wing coalition had garnered 43%. Due to Italy’s electoral system though, the party was able to take just under 60% of the parliamentary seats.

As leader of the largest party, Meloni has become the Prime Minister. She’s been in parliament since 2006 and served in Berlusconi’s right-wing coalition government between 2008 and 2011 as Minister of Youth.

Meloni’s finance minister is Giancarlo Giorgetti, a member of the Lega. He is a long term politician who has been in Parliament since the mid 90s. He served as Minister of Economic Development in the previous Draghi government. He’s previously been an Auditor and worked in Tax affairs. 

Meloni’s foreign minister is well known politician Antonio Tajani, a member of Berlusconi’s Forza Italia party. A former European Commissioner for Industry and president of the European Parliament. Both these are seen as respectable and have levels of experience that are lacking in many from Meloni’s own party. Many other new Ministers have experience in various levels of government which the markets have seen as favourable.

Leaders of the new Italian Government after meeting the Italian President, Attribution, via Wikimedia Commons

What can we expect in the coming months?

Despite previous rhetoric, few commentators expect that the Meloni government will diverge greatly from the previous administration. Italy is under significant pressure from the EU and will need to follow certain policies in order to be eligible for the next tranche of European funding. Therefore the markets have had little reaction to this new government.

Italy is restrained by its European commitments and needs to access EU funding. Nobody realistically believes that the country could thrive outside being at the heart of the EU. The FdL and Meloni have heavily moderated their previous policy positions and have become more or less at one with Italy’s place in the eurozone.

Despite the right-wing coalition having nearly 60% of the seats, it won’t be an easy ride for her to govern effectively. There are many big personalities and egos in this new government and the leaders of the Italian right are well known for their spectacular rows and knifing each other in the back (and sometimes front.) Few expect that it will last a full five year term.

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