It has now been over two months since Italy had a government, but that may be about to change.
This week, the two largest parties after March’s elections agreed on a radical coalition programme. That in itself is bizarre even by the colourful standards of Italian politics: both are anti-establishment parties, one from the extreme left, the other from the far right.
Then there’s the issue of who will be Prime Minister. Curiously, neither party’s leader wants the top job, and two academics are now being floated as contenders. But while the role is still up for debate, the policy direction is not. These two polar-opposites have united in their belief that the answer to Italy’s problems is to spend spend spend.
Plans include tax cuts, scrapping pension reform, and a universal basic income – recently trialled, then ditched, in Finland. It’s an expensive package, totalling an extra €100bn a year by some estimates – six per cent of Italy’s GDP.
But in addition to straining Italy’s creaking finances yet further, it also sets the country on a collision course with the EU’s fiscal rules, which demand austerity for Eurozone members mired in debt.
We saw something similar in 2015. Greece’s newly elected far-left Prime Minister, Alexis Tsipras, brought his country to the brink of collapse as he fought against the rules imposed by the EU, ECB and IMF in exchange for a bailout.
For months, the prospect of Greece crashing out of the Eurozone looked alarmingly likely, causing markets to tumble. In the end, despite a referendum rejecting the EU’s terms, Tsipras was beaten into submission.
In contrast, markets and global leaders seem calm about developments in Italy. Perhaps, unlike with Greece, there is a sense of complacency. As one of the six founders, Italy is a core EU member, and there may be an assumption that the situation will not be allowed to spiral out of control.
But caution should be advised. Both the leading parties are fiercely eurosceptic, and have in the past advocated leaving the single currency and the EU itself, though they softened their stance before the election. Brussels is playing with fire if it thinks that they can be pushed around like Tsipras was, and is ignoring the buildup of anti-EU sentiment in Italy after years of austerity and a refugee policy that has proved extremely unpopular in parts of the country.
A certain degree of eccentricity is expected from Italian politics, but this cocktail of populism, euroscepticism, and fiscal abandonment should not be underestimated. Keep an eye on developments, and brace yourself for what could become a summer of Italian chaos.