The Italian prime minister answers questions during the year-end press conference.
Alessandra Benedetti – Corbis | Corbis News | Getty Images
Italy is on the brink of another political crisis when members of the coalition government question the prime minister’s plan for the country’s economic recovery.
The nation of southern Europe is no stranger to political conflict; tensions, scandals and small majorities have led to more than 60 governments since World War II. However, the latest political dispute comes at a particularly painful time, as the number of coronavirus infections and deaths is predicted to be the highest in Europe to date and its gross domestic product (GDP) is rising. has reduced by about 10% by 2020.
“In the most likely scenario, the crisis will lead to the formation of a new executive,” Wolfango Piccoli, co-chair of consulting firm Teneo, said in a note Monday.
Prime Minister Giuseppe Conte has been in power since June 2018, but is already leading his second government after a political dispute in the summer of 2019 culminated in a new coalition formed by the left-wing Democratic Party and the Five Star Movement , another left-wing party, in government.
The Gordian knot is how to spend EU funds and whether they are allocated to new or pre-existing projects.
Alberto Alemanno
Professor, HEC Business School
The latest challenge is for Conte, without political affiliation, to face former Prime Minister Matteo Renzi, who left the Democratic Party in September and created his own group called Italia Viva, which supports the coalition and which he holds two ministerial posts. However, Renzi threatens to withdraw his support for the current executive arguing that Conte’s plan for economic recovery is not ambitious enough.
The European Union agreed to take advantage of financial markets in search of € 750 billion ($ 920 billion), which will be invested in the 27 nations to help them resurrect their economies after the coronavirus pandemic.
Italy is one of the main beneficiaries of these funds, which expects about 208 billion euros in grants and low-interest loans. However, the challenge is how to make the most of this money, as Italy has the second highest pile of public debt in the EU and its economy was already struggling before the pandemic.
“The Gordian knot is like spending EU funds and whether to allocate them to new or pre-existing projects. While the former would further increase Italy’s record public debt, the latter would reduce the positive impact of the EU’s financial support. EU, ”Alberto Alemanno, a professor of EU law at HEC Paris Business School, told CNBC on Tuesday.
Experts such as Piccoli de Teneo believe the dispute “will come to an end this week when Conte will present his revised economic recovery plan to the cabinet for approval. The trigger for the formal opening of the crisis could be the refusal of the two living ministers of Italy. to endorse the plan “.
“Although Italia Viva is only a minor partner in the ruling coalition, the figures are so small in parliament, especially in the Senate, that withdrawing its support could lead to a vote of confidence in the prime minister,” he added.
Ignazio Corrao, an independent Italian lawmaker in the European Parliament, told CNBC on Tuesday that a quick election is likely to be avoided and that there will be a new prime minister or a cabinet reshuffle.
Renzi “must use all the political means he has now … to have powers in the future,” Corrao said, suggesting the political dispute could be a tactic for the newly formed Italia Viva party to gain more ground.
The yield on the ten-year Italian bond has risen slightly this week as markets opened during the first days of trading in 2021 and occurred at the base of the political situation. However, yields continue to trade at low levels, at around 0.532%, due to the large number of monetary and fiscal stimuli in Europe.