Meloni Baloney: Italy’s Furor Over Right Tilt Unexpected
By Michael Moran, Contributing Author/ April 21, 2023
Michael Moran is a geo-strategy and sustainability expert whose books and documentaries have won awards and influenced the global debate for decades. He currently serves as Chief Markets, Risk & Sustainability Officer at Microshare, a global leader in Smart Building and ESG data technologies, and is a Lecturer in Political Risk at the Josef Korbel School of International Affairs at the University of Denver.
Moran is a former Principal and Chief US/Macro Analyst at Control Risks and led digital content strategy at the Council on Foreign Relations, winning three Emmy Awards for documentary work while there. He also has launched successful editorial offerings for Roubini Global Economics, the Carnegie Corporation of New York and other clients and was a member of the launch team at MSNBC.com, where he served as a columnist and international editor for over a decade.
He is author of several books, including The Reckoning: Debt, Democracy and the Future of American Power, of which Ian Bremmer of Eurasia Group wrote: “Moran is a sharp thinker and fine storyteller, and The Reckoning is a terrifically engaging read.” Moran is co-author with economist Charles Robertson of The Fastest Billion: The Story Behind Africa’s Economic Revolution and a novel, The Fall (2015). His analysis of political risk and international affairs has appeared regularly on CNN, CNBC and other major broadcast outlets and in the pages of The New York Times, the Financial Times, Forbes, Foreign Affairs and Foreign Policy magazines and many other journals.
Welcome to Britaly
Back in October, around the time when micro-tenured UK Prime Minister Liz Truss was driving her nation’s financial and international reputation into the ground, The Economist featured a cover story entitled, “Welcome to Britaly.”
What brought the proud Brits, whose economy is still the sixth largest in the world, so low as to be compared with Italy, which ranks 10th and seems doomed to demotion as emerging market powers like India, Brazil and South Korea continue their rise?
“Things are turning ever more Britalian,” the magazine quipped, going on to list things many associate with modern Italy: “A rise in populism, sclerotic GDP growth, chronic regional inequality and separatist sentiment, growing skepticism in global bond markets about the country’s economic future and political instability that saw the country elect four prime ministers in five years.
It was an amusing comparison, as long as you were not Italian. And while it looked good on paper, there was one very salient, missing point: Italy has not severed its ties with the European Union (EU).
Meloni The Phony
This was not what anyone expected when the rightist, formerly neo-Fascist Brothers of Italy won 44 percent in the September general elections. International media was replete with references to Mussolini’s 1922 March on Rome, which overthrew the weak post-war Italian democracy, and of the Brothers’ thrice-removed ties to the defunct Italian Social Movement, the party formed in 1946 by former followers of Il Duce.
Yet at the helm of the Brothers was not an overwrought militaristic bloviator, indeed not even “a brother.” Instead, 46-year-old Giorgia Meloni, the daughter of a struggling single mother and now leader of a nation that has never had a female head of government.
Since taking power, she has raised eyebrows by appointing some cabinet members with views well outside the mainstream of the EU’s center-left, center-right pedigree. That long consensus looks outdated these days, with populists in power in Spain, Poland and Hungary, and even Sweden’s governing coalition dependent on support from the hard right Sweden Democratic Party.
Meloni’s rightward leanings, viewed in context, look less like a revolution than an expression of where Europe’s new center is settling. It is pro-business, pro-Christian, anti-immigrant yet on questions of social policy and welfare spending, well to the left of most American Democrats.
Triumph of the Jersey Shore Over the Hamptons, Italian Style
A mother herself now and advocate for generous social spending on children and curbing illegal immigration, Meloni has deftly distanced herself from the Brothers’ Il Duce nostalgia and Euro-skepticism, recasting the party as the voice of an Italian middle class that feels ignored by the governing elites. If that sounds vaguely Trumpy, that’s because it is, but without the xenophobia and administrative chaos. As veteran journalist Rachel Donadio put it in the Atlantic this month, Meloni’s victory was “Italy’s equivalent of the triumph of the Jersey Shore over the Hamptons.”
Perhaps most visibly, she quickly moved away from the party’s previous sympathetic tone toward Vladimir Putin and has thrown Italy’s support behind Ukraine’s war efforts. While this has been largely rhetorical, fears that Italy’s dependence on Russian gas supplies would lead to a rift over Russia sanctions have so far proven groundless.
Italy’s Business Environment
One result of the rightward shift in Italy has been a more pro-business slate of proposals from the new government, particularly with regard to small and family-owned businesses that dominate much of the economy.
Giants like ENEL and ENI (energy), Fiat and Ferrari (automotives), UniCredit and Generali (banking) have a way of getting their way in Rome whatever the government of the day pledged. But the coalition has also pledged to pursue a flat-tax both for individuals and business and to raise the minimum pension levels nationally, a popular – if unfunded – promise that likely accounted for a good deal of the Brothers’ surge from a minor party to Italy’s largest vote-getters in September 2022.
Whether or not such ambitions can be achieved is another question. Between divisions in the coalition itself, the determined opposition to such policies from the opposition and the EU’s own extraterritorial leverage, experts suggest tax reforms and regulatory relief will be incremental and at the margins.
Debt as a Political Driver
Much of what constrains Meloni or anyone looking to reform Italy is debt. Outside of Japan, the champion of debt to GDP at over 220 percent, Italy ranks second among large economies, hovering around 145 percent.
This means Italian fiscal and monetary policy is watched closely by global bond markets, which if alarmed can quickly push the cost of Italy’s need to finance government spending into double digits. The last time that happened, during the Eurozone crisis in 2012, Italy found itself added as a second “I” with other debt-strapped EU nations Portugal, Ireland, Greece and Spain (the “PIGS” because “PIIGS”). Meloni’s government clearly wants to avoid that fate, and its adherence to the fiscal promises that the outgoing government of Mario Draghi made to Brussels is a case in point.
Sticking with the Paris Accord
Meloni has also vowed to stick with Italy’s Paris Accord goals with regard to net zero reforms, another example of her government’s drift from harder, nationalist rejection of such extraterritorial pressures during the election campaign.
Yet the new coalition is pushing back against the EU’s goal of phasing out the sales of combustion engine vehicles by 2035. In her view, electric Lamborghinis, Ducatis or Moto-Guzzi are a non-starter. The EU has proven an irresistible driver of regulatory change in other areas, however, including data protection and greenwashing.
The power of an individual member state to resist such pressures – even an automotive powerhouse like Italy – is questionable.
Wants Business Environment Fixed
But there are concrete examples of Meloni’s government moving to temper the elements that put Italy near the bottom of business environment ratings within the EU.
Her sympathy for the strong networks of small businesses that make up a good portion of Italy’s export industries in luxury goods and food – the Italian equivalent of Germany’s Mittelstand – appear to have won the Brothers’ under her leadership the support of powerful business leaders in the North who had traditionally supported La Lega.
These business leaders have watched as Emerging Market competition from countries like India, South Korea and Brazil have cut into Italy’s traditional export markets. By making peace with the EU and including tax reform as a priority in her government’s platform, she appears to have won at least the ear of Italian business, if not their full trust just yet.
Avoiding an ‘Own Goal’
And that takes us back to Brexit. There is anti-Brussels sentiment in Italy, as in many EU member states, and Brexit shows us that a populist upsurge could result in unpredictable things. Yet it is almost implausible that the government would opt for “Italexit”, the inelegant label the financial press has given the idea of an Italian exit from the bloc.
The rightist Northern League (La Lega del Norte), in coalition with Meloni’s Brothers, spent the 1990s and early part of this century agitating for an independent Lombardy, playing on resentment that supposedly hard-working northern Italians being overtaxed to subsidize the backward Mezzogiorno, the less developed region south of Naples.
Politics of Resentment
This is an update on its politics of resentment, La Lega now directs its ire at Brussels, which despite huge bailouts of Italy during the Eurozone crisis and then after the global pandemic, is characterized as an agent of cold-blooded northern European capitalist vultures. Similar pot-banging emanates from Forza Italia, the mostly discredited creature of former Italian President Silvio Burlesconi, a diminishing but always mischievous presence in the center-right.
Yet despite the fact both right-leaning groups are part of Meloni’s governing coalition, the prime minister has cleaved faithfully to Draghi’s fiscal conservatism and promised a productive approach to the EU. This is no small achievement given that her own Brothers of Italy faction is even further right than La Liga and Forza. The fact that Meloni has been able to hold the line certainly suggests she has a talent for politics. Yet it also calls the bluff on those who would take Italy down the road to a falsely flexible “independence from Brussels.”
As Meloni vowed in her inaugural address last October, the goal should not be “to slow down or sabotage European integration but to steer it to be more efficient in its response to crises…and to be closer to people and businesses.”
Cost of Circling the Wagons
Perhaps the hotheads in Meloni’s coalition have learned from Britain’s mistakes. As a case study in its own goals, it has few recent peers.
As the UK’s own Office for Budget Responsibility reported in December, expects Brexit is likely to reduce Britain’s output by 4% over 15 years compared to what it would have been if it had stayed in the EU, and exports and imports both are now forecast to fall by around 15% over the long-term, precisely the opposite result promised by the Brexiteers.
Italians spent much of the years following World War II trying to win the respect of their richer EU cohorts, appear to be taking the lesson.