A 19 year old Italian would have been the same age as the euro when Sergio Mattarella, Italy’s president dissolved parliament to call an election on the 28 December. As the upcoming general election approaches, Italy, once Europe’s most ardent supporter, has become decidedly eurosceptic.
Gone is the optimism in the euro but unlike in say Britain, Germany or France, in which critics of the European Union tend to be among the older members of the population, in Italy that trend is reversed.
A messy coalition in the offing
The eurozone’s third largest economy will elect members to both chambers of its parliament in March 2018 for the first time under a new and controversial electoral law. The law, passed in 2017, enables coalitions to be formed prior to the election itself and was vehemently criticised by the leading party in the polls, the Five Star Movement.
With the ruling Democratic Party seeing its popularity sliding amid political infighting and division, a familiar face has returned to take advantage of this pre-electoral coalition forming.
Silvio Berlusconi’s comeback following a tax fraud conviction in 2013 is significant for many reasons. His Forza Italia party represent the most likely kingmaker in the March elections due to its policy overlap with the far-right Northern League and Brothers of Italy. But it is his calls for a return of the lira as a parallel currency to the euro that have worried Europe.
In this respect, the octogenarian Berlusconi is far from alone. In fact, only the out-of-favour Democratic Party supports a singular euro. Considering that at its inception, Italy was one of the most fervent advocators of a Single European Currency, this speaks volumes as to the country’s economic progress since then.
Populism & scepticism in euro
Italy has the EU’s highest percentage of young people not in education, training, or work according to Eurostat. Those who have grown up with the euro have only ever known economic and political instability. Many regard the adoption of the euro from its inception in 2002 to have “doubled prices overnight” while wages have stagnated or not grown in proportion since.
Further to this, the perceived economic prosperity of Germany and the Nordic countries at the expense of Italy, Spain and Greece has cause disaffection with the euro to grow.
Potential euro exit for Europe?
A consequence of this has been the rise of anti-euro sentiment. Of the four leading parties in the polls, three support the introduction of a parallel domestic currency. Berlusconi, a long supporter of a “new lira”, called in August for its introduction for domestic use, sparking an investor sell off of government bonds.
Under proposals, also supported by the regionalist, eurosceptic Lega Nord party who are polling at a similar level of 15 percent, the euro would remain in use for international transactions and tourists.
They could feasibly join Berlusconi’s Forza Italia in a coalition with the far-right Brothers of Italy in March. With Berlusconi banned, the explosive Matteo Salvini would represent a possible next prime minister. This worries Europe.
The reality of the dual currency proposal however is unlikely, but not impossible. If it were to be introduced, and is politically and theoretically possible, argues Roberto Perotti of Milan’s Bocconi University, it could represent the first steps on the long path to euro exit.
Turnout and overall disaffection
The election looks likely to reflect a nation uncertain both with its political elite and Europe. The youth are fed up and are the most likely to vote for the disruptors in the form of the populist Five Star Movement. But turnout is predicted to be low, with 70 percent of young people planning to abstain.
While a right-wing coalition looks set to win the highest number of votes, polls point towards electoral gridlock and a hung parliament. Italy is no stranger to this, due to the inherent design of its electoral process. The leading party in the polls, the populist Five Star Movement, will most likely be kept out of power by the other parties while the Renzi’s ruling Democratic Party are divided and struggling to form allies.
Uncertainty will worry Europe and the Italian situation represents the next potential destabiliser moving into 2018, especially if voters look to mandate a parallel currency.
Italy, a divided country between the more prosperous north and the underdeveloped south could be a microcosm for Europe as a whole. The eurozone has posted strong growth recently. Indeed it grew faster in 2017 than the US economy, but it’s clear it remains a divisive issue, largely splitting northern and southern Europe.
Brussels will likely be monitoring the Italian situation with bated breath, the election however is unlikely to provide anyone with a clear mandate to solve either Italy’s youth problem, or its relationship with the euro.