Bringing Europe's Leaders Together

Giorgia on my mind

Giorgia Meloni’s reassuring tone on Europe and the economy are welcome but the far-right leader faces a tough balancing act, writes Bernard Spitz.

As expected, Italy has tipped over, giving a majority to the right-wing coalition. In a male-dominated political world, it is a woman, Giorgia Meloni (and not Georgia as in the Ray Charles song), who should become the first President of the Council of the Italian Republic. A period of consultations begins before the constitution of a government that all of Europe is waiting for, and the political and economic strategy that will be pursued.

The figures speak for themselves: even if the Italian voting system, which combines majority and proportional voting by electing deputies and senators simultaneously, is complex and the final results will not be announced until later in October. What emerges from this election is a majority for the right-wing coalition, winners and losers, and a period of uncertainty about the political balance and programme of the next government.

1. The winners

The short electoral campaign that just ended resembled a cycling race of the Giro, the Tour of Italy. Three groups of two riders were in the race: the leading duo expected according to the polls to win 25% of the vote with Meloni and Letta; the second group estimated at around 15% with Salvini and Conte; and the third group, below 10%, with Berlusconi and the Calenda-Renzi duo. At the end, there are only two groups left. Cinque Stelle succeeded in its campaign by retaining 15% of the vote, while the League fell back to 9%, barely more than Forza Italia and the Terzo Polo alliance, a key result in view of the recomposition of the Italian political landscape.

The first winner, of course, is Giorgia Meloni. With more than 26% of the vote, her success is resounding. It is a personal victory, as her party, which was created ten years ago and had never exceeded 5%, is embodied by her. By gathering more votes on her own than all her allies, she has established her authority. Her relationship with Mario Draghi is also untarnished. The only party leader to have refused to join the government, she finally supported him in his pro-Ukraine policy and was thus the only one – together with Enrico Letta – who did not betray him.

The second winner was the Five Star Movement and Giuseppe Conte, its leader. Not that his 15% is a brilliant result compared to the 32% of 2018. But a much lower score was expected. Conte occupied the niche of left-wing populism, the LFI version. He skilfully supported his protest positioning on the Five Stars’ flagship product: the basic income or “citizenship income”. This benefit, which benefits a third of the inhabitants of Naples and much of southern Italy, has lifted many families out of the poverty line. By fiercely defending it, the movement managed to gain a majority in some parts of the region and thus to win seats. At the end of the day, its score, which is close to that of the League, puts it in a position to change the balance of power on the left with respect to the Democratic Party.

The third winner, to a lesser degree, was the “Terzo Polo”, the third pole of the Carlo Calenda – Matteo Renzi tandem. Their breakthrough of around 7% remains modest but they are on an equal footing with the League and Forza Italia, and the two men can claim to be on an upwards trajectory. They aim to occupy the centre, in a Macronian positioning, at the expense of Forza Italia and the Democratic Party. They are the darlings of the economic world, each in a different register which the future will tell if it is complementary or if the cohabitation between the two proves impossible. The former had been the minister of the latter, Renzi still being disliked in public opinion, even though it was he who enabled Draghi to come to power. An exceptional manoeuvrer, Renzi may find in this election the beginning of a future personal comeback.

2. The defeated

Woe betide the defeated? With just under 20% of the vote, Enrico Letta is the central pillar of the opposition. He is even the only one of the four parties that came out on top in the last elections not to have lost ground. But this honourable score remains disappointing, outdistanced by Fratelli D’italia; especially in view of the results, we can see that if he had succeeded in forming a coalition as broad as that of the right, with Cinque Stelle and Calenda, he would have been in a position to win. In the absence of such a coalition, and without having succeeded in imposing strong campaign themes, the Democratic Party was forced to lead a defensive campaign with the unimaginative objective of reaching one third of the seats, which is insufficient to govern but allows it to block constitutional reforms. Faced with the populist wave, he could only limit the damage by exceeding a quarter of the vote. Ahead of the next party congress, Enrico Letta has already announced that he will leave the leadership. It is worth noting that the former leader of the Five Stars, Luiggi di Maio, has emerged from this election very weakened. Opposed to Conte, his moderate centrist line was swept away. Resisting the Five Stars on the one hand and the Terzo Polo on the other will be the priority for the Democratic Party if it does not want to end up like the French Socialist Party.

The same shake-up is foreseeable in the Northern League. Matteo Salvini failed for the fourth time in four years with a very bad score, half of the 17% he reached in 2018, when he had already been overtaken by the Five Stars. Then in 2019, after its success in the European Elections, it had unsuccessfully attempted a power grab that had thrown the League into opposition. Then the advent of Mario Draghi kept him out of the picture while another of his party’s leaders, Giancarlo Giorgetti, took the spotlight at the economy ministry. And now he is down to less than 10%, outpaced by Meloni within his own coalition and far outpaced again by the Five Stars. This is one setback too many that could cost him his seat by bringing in a regional president – perhaps Luca Zaia from Veneto – to lead the movement. He has so far refused to consider resigning, but the story is not over.

Finally, Silvio Berlusconi, while losing a lot of votes compared to the last election, has limited the damage better than expected. It is true that Forza Italia is no longer more than a shadow of the party that once won power in the name of liberal values and entrepreneurship. Silvio Berlusconi, who dropped Draghi because he believed in his chances of being elected President of the Republic, could nevertheless become President of the Senate. With his 8%, he remains indispensable to his coalition to govern the country and continues to occupy part of the centre-right, a key space in view of the political recomposition to come.

3. What will happen?

First of all, nothing will happen, it is necessary to leave time for the proclamation of the results, as foreseen by the Constitution. Mario Draghi remains in office and will play a decisive role in the future, as will President Mattarella. A number of elections will take place that will reflect the new post-election balance of power. Those of the leaders of the parliamentary groups, for example, will reveal the internal developments in the Democratic Party and the League. At the same time, discussions on the composition of the government will take place behind the scenes. It is likely that the new government team will be in place by late October.

During the populist victory of Five Star and the League in 2018, there was a moment when the appointment of notorious anti-Europeans to the government was considered. President Mattarella vetoed this, which led to the choice of the previously unknown Conte. Such an episode is unthinkable today. More than ever, Italy needs Europe as Europe needs Italy. Never has European financial support for Italy been so colossal, no Italian government could do without it; symmetrically, the Union cannot afford a divorce with its third largest economy.

Giorgia Meloni has understood this well. In her speech to the country’s economic leaders in Cernobbio at the beginning of September, everything she said was compatible with Europe on an economic and strategic level. She reaffirmed her backing for the policy of support for Ukraine, for NATO, for sanctions against Russia, for the need for prudence in public spending in order not to increase deficits, for the problem of the debt … This is not enough to remove all doubts about what Giorgia Meloni will do when tested in power. Many fear that she will stick to a sovereignist and national line. The implementation of the National Recovery and Resilience Plan was already a formidable challenge for Mario Draghi, it will be even more so for Giorgia Meloni who will have to be judged by her actions. The markets will not fail to do so with more pragmatism than some politicians. In this respect, the President of the European Commission would have done better to avoid launching into a diatribe whose only effect has been to reinforce populism in Italy against European technocracy.

4. Giorgia Meloni’s assets

To show that she is serious about the economy, she could appoint an independent technocrat, Fabio Panetta, a member of the European Central Bank’s board, to the finance portfolio; or better still, confirm the current incumbent Daniele Franco. Of these two personalities, the one who would not be in government would also have a good chance of being appointed Governor of the Bank of Italy.

Another expected appointment is that of the Minister of Foreign Affairs: a priori, the choice should also be reassuring. Italy has no shortage of former diplomats, some of whom hold non-executive chairmanships of major industrial groups, which will reassure both the markets and the chancelleries.

Giorgia Meloni has three main assets:

Firstly, her declared prudence, her uncompromising speech against Russian aggression, and her overtures to Europe, particularly towards Paris and Berlin. All of this gradually made her more credible. Her most virulent remarks were also constrained to more societal subjects such as immigration and criminality, while affirming that she would not question the right to abortion.

Secondly, the setback of her best ally and rival, Salvini, who will not initially be able to impose his views. His weakness, like that of Berlusconi, will facilitate the policy of support for Ukraine, even though both men are in Putin’s fan club. It will also allow the government to pursue a coherent foreign policy.

Last but not least, her relationship with Mario Draghi. The latter has not ceased to de-demonise it over the last few months, joined in this by Carlo Calenda. Both have said that there is no danger of fascism in Italy, depriving the opposition of simplistic criticism. She needs Super Mario to reassure the markets. The confirmation of Daniele Franco – a very close friend of Draghi’s – in his post would be a positive sign. Mario Draghi himself will be in a position to run for the post of President of the European Council in the future, or to succeed Ursula von der Leyen at the head of the Commission, or to become President of the Republic after Sergio Mattarella.

5. A difficult game nevertheless

However, the leader of Fratelli d’Italia is facing some tough challenges. The expectations of the population and the inflationary shock will be all the more difficult to satisfy as the economic constraints are significant. The debt burden will grow as interest rates rise. The evolution of the Ukrainian conflict has the potential to divide Italian society. Market distrust will not be easy to overcome and Germany’s agreement to strong action by the European Central Bank to support the Italian spread remains unlikely. The spread between German and Italian 10-year rates has already risen from 130 to 240 basis points since the beginning of the year. In this difficult context, with many open questions, the vigilance of major EU capitals is still required.

Can Giorgia Meloni find credible people to support her in the day-to-day management of government business? Will she be able to reassure her partners within the Union without disappointing her base? Will she be able to strike a good balance between her Atlanticist preference and her European anchorage? Will she succeed in toning down her sovereignist tendencies in order to engage in balanced partnerships with the other European powers, notably France, in line with the Quirinal Treaty? Will she promote the rebalancing of European energy policy? Will it be possible to reform the management of migratory flows at European level? Will Fratelli d’Italia’s support for the Polish conservatives not weaken European cohesion? Will the reforms initiated by Draghi be implemented, even with some variations?

These are all questions that can only be answered by the facts. The B20 and G20 meeting in Bali in November, which will mark the multilateral diplomatic debut of Giorgia Meloni and, before that, her meetings with President Macron and Chancellor Scholtz, will give the first clues. The Franco-Italian-German meeting of the three employers’ associations, Medef-Confindustria-BDI, in Rome at the beginning of December, will offer a business perspective on current European challenges. Fratelli d’Italia’s mutation will be visible in the European Parliament, depending on future developments. After having been the ally of the British Conservative Party before Brexit, could the party not move closer to the CDU?

After a possible honeymoon period, which will be short in any case, the new President of the Council will quickly find herself faced with the dilemma that any government faces in order to last, especially in a country where governmental instability is the rule: keeping one’s promises while dealing with reality.

Bernard Spitz is Chairman and CEO of BSConseil and President Europe and International at MEDEF