Salvini has called an end to the government, but a brewing economic crisis could scupper his ambitions

Martin J Bull, The Independent

The decision by Matteo Salvini, leader of the right-wing League, to withdraw his confidence in the coalition government his party makes up with the Five Star Movement and demand immediate elections, has abruptly ended Italy’s brief experiment in “populist coalition” government.

Despite protestations to the contrary, the move is in line with Salvini’s strategic goal of transforming the League from a previously northern “separatist” movement into a right-wing, “sovranista” (reclaiming national sovereignty) party which has the electoral strength to lead both a far-right government and a European network of like-minded parties.

That strategy, prioritising politics over policy, explains the wretched performance of the populist coalition over the past 14 months. Effectively thrown together as a result of a hung parliament after the 2018 general election, the two parties (the League as head of the largest coalition and the Five Star as the largest party) were unable to agree who should lead it, so appointed an unknown law professor, Giuseppe Conte, as prime minister, with the two party leaders (Salvini and Luigi di Maio) acting as his deputies.

This arrangement sapped any authority from the prime minister’s office and promoted a form of irresponsible electioneering in government by the two parties. Squabbling over most policies, they promised a combination of tax cuts and public expenditure rises that brought the Italian government to within a hair’s breadth of the European Commission’s infraction procedure for states failing to respect the EU’s deficit rules.

Salvini has been uncompromising, either getting his way over policies which reflect his “Italy first” approach (such as a the bill, just signed into law, that increases the fines to €1m for ships bringing migrants into Italian ports) or bemoaning with his supporters the extent to which Five Star ministers have blocked his initiatives.

This approach has brought the League spectacular results. In May’s European parliament elections it emerged as the largest party with 24 per cent of the vote, 7 per cent higher than the Five Star Movement. And opinion polls on national voting intentions have registered a consistent rise in support to nearly 38 per cent today, against the Five Star Movement’s 17 per cent, effectively reversing the situation in the 2018 general election, when the League had just over 17 per cent against Five Star’s 32 per cent.

This puts in context Salvini’s decision to pull the plug on the government. Prompted by a vote in parliament on a high-speed rail project linking Turin with Lyon, which saw the two parties in opposite camps, Salvini said that the split on such an important public policy issue confirmed the government was dead.

But he was also looking for a pretext to bring down the government, emboldened by the latest polls and angered by the latest revelations of the investigation into his possible involvement in alleged Russian funding of the League’s activities.

Yet, Salvini’s tactics may still backfire. He leaves in his wake a perilous situation for the country in relation to its budget. The earliest realistic date for the elections is 27 October, yet the government must submit its adjusted budgetary projection to the European Commission by 15 October, its budget to parliament by 20 October, with the budget having to be approved by the end of the year. If it is not approved in that time scale, an automatic rise in the VAT rate from 22 per cent to 25.2 per cent (and of the reduced VAT rate from 10 per cent to 13 per cent) is automatically implemented on 1 January as part of a “safeguard clause” reached with the European Commission earlier in the year to ensure that the deficit target is met in 2020.

The only exit from the safeguard clause is for the government to find expenditure cuts and/or new income generation to the tune of €23bn before the end of the year.

Small wonder that Conte has rejected Salvini’s insistence he resign as prime minister, and has called on him to table a motion of no confidence in parliament and explain to the Italian people his reasons for bringing the government down. A weak prime minister he may be, but Conte is aware that Salvini is currently playing with fire, and if it gets out of control it could burn more than just his party.