The Italian Stall-ion: Political upheaval in Italy

September 10, 2019

2 min read

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What's going on here?

Italy’s 66th post-war government (since 1945) collapsed after only 14 months in power.

What does this mean?

Italy’s strained coalition government between the far right Lega (League) party and the controversial Five Star Movement (M5S) party fell apart on August 23rd.

Perpetuated by each party’s divergent agendas, with Lega favouring heavy tax cuts and M5S championing an increase in welfare benefits, the widely popular Matteo Salvini (League party leader and the then Deputy Prime Minister) initiated a vote of no-confidence against Prime Minister Giuseppe Conte in early August.

In response, Conte resigned which led to a new government forming just two weeks later, this time between M5S and the leftist Democratic Party (PD).

What's the big picture effect?

While Conte retains his position as Prime Minister in this new coalition, political uncertainty remains rife as N5S and PD are longtime political enemies. This has led many political analysts to predict that the partnership is unlikely to last even one political cycle.

This partisan history only serves to prolong Italy’s precarious situation. Already wary business sentiments are projected to worsen over this transition period; creating serious repercussions on employment rates. Given widespread youth unemployment, at 28%, and rising poverty, the current political and economic situation will not facilitate the commercial activity critically needed to pull Italy out of recession.

Considering Italy’s position as the third largest economy in the Eurozone and historically volatile political climate, increased economic instability could trigger yet another financial crisis throughout Europe. This would have serious ramifications for an already fragile Euro. Furthermore, Italian public debt is currently an astronomical 130% above its national growth rate, making deteriorating economic conditions far more probable. 

Although the government’s 26 point plan includes expansionary fiscal policies and welfare initiatives, the feasibility of these proposals are still unknown. It remains to be seen whether these efforts will generate social order and national wealth or merely add to its mounting debt.

Report written by Debra Grace

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