Draghi Toppled by a Populist Coup in Italy

The concerns about Lega’s ambivalence proved well founded as Lega eventually set conditions that Draghi would not accept. Following Draghi’s resignation, elections will be held by mid-October at the latest.

A political crisis initiated last week by M5S leader was eventually brought to an end by Lega’s leader Salvini, in cooperation with Fratelli d’Italia. Since last Thursday, we had been flagging the significant risk for the government’s stability stemming from the temptation of Lega to go for elections. In fact, the choice by Lega between supporting Draghi and favoring elections was essentially binary.

As it transpired, Lega and Fratelli d’Italia chose to complicate a compromise which was well within reach (even after a full defection by M5S) by subordinating their support for Draghi to the formation of a new government with a revamped agenda and a stronger role for Lega and Fratelli d’Italia. Draghi had been adamant that he would have gone ahead only if parties had been willing to commit to the original government agenda. Eventually, Lega and Fratelli d’Italia did not even participate in the vote, crystallising the collapse of the government majority. To note, by the time Lega and Fratelli d’Italia insisted on forcing conditions unacceptable to Draghi, the M5S defection had become irrelevant for the survival of the majority.

This chain of events brings a sudden end to a government experience which we have repeatedly described as transformational for Italy, at least as long as it lasted.

It is now expect that President Mattarella will dissolve the Parliament and call for snap elections in a window between the last week of September and the mid-October. In the meantime, the government will remain in place with limited powers, although Draghi may no longer be the PM.

The Road Ahead for Italy

Early election would delay the budget and challenge the implementation of the Recovery Fund, adding policy uncertainty to the economic risk posed by the energy crisis. Finally, opinion polls point to a clear lead by Fratelli d’Italia and the centre-right coalition.

The defection of the M5S from the ruling coalition in the confidence vote has drawn a wedge within the centre-left coalition (M5S and Partito Democratico). In fact, it will be very hard, if not impossible, for the Partito Democratico — the most loyal supporter of PM Draghi — to run an electoral campaign next to the party who some have directed blame for weakening his office. Therefore, the consequence of the current political crisis is that the electoral strength of the centre-left coalition has been severely weakened and, as a consequence, the centre-right coalition led by Fratelli d’Italia, finds itself even better positioned to win the next election.

Who Really Wants an Early Election?

Post the ignition of the political crisis, an early election is unlikely to be in the interest of the M5S political party that, after achieving 32.7% in 2018 election, has been consistently falling in the polls during Draghi’s government. Even if it has benefitted by its support to PM Draghi, the Partito Democratico would also likely not benefit from early election, given the weakness of its main partner in the coalition.

Within the centre-right coalition, incentives are more nuanced: Lega has also been steadily falling in the polls while Forza Italia has slightly benefitted from its role in the government. It is widely believed only Fratelli d’Italia, the sole party sitting in the opposition and the leader according to opinion polls, would have a clear incentive to take advantage of their strong momentum in early election.

Really Hit Draghi Like and Anvil from the Sky

Not too long ago, the risk of an early election seemed limited, with an expectation that a government led by Draghi would continue until the Spring of 2023. With the M5S falling in the polls since October 2021 and also experiencing a split led by the Minister of Foreign Affairs, Luigi Di Maio. M5S leader, Giuseppe Conte, challenged PM Draghi to realign the cabinet’s agenda to the proposals advanced by the M5S.

Earlier, in a display of confidence toward the M5S, Draghi reiterated that not only had his government started with the support of the movement, but it also cannot continue without it. After a day-long internal discussion, the M5S decided to deny the confidence vote to Draghi on the latest Decree to offset the impact of the energy costs surge.

Two parallel trends persist in the Italian polls: first, Fratelli d’Italia and Partito Democratico continue to see increased support and compete for leadership in the polls; second, Lega and M5S lag behind. Within the four main Italian parties, the Eurosceptic Fratelli d’Italia maintains its lead of almost 2pp over the Partito Democratico. Meanwhile, M5S and Lega, the minority stakeholders in the two main coalitions, continue to fall in the polls.

Among the centrist parties, Forza Italia, led by Silvio Berlusconi, polls below 8% after a steady rise since the beginning of Draghi’s government. The two other centrist parties — Azione & +Europa led by Carlo Calenda and Italia Viva (IV) led by Matteo Renzi — have made marginal gains in the polls, of around 5% and 2%, respectively.

The coalition between the most Eurosceptic parties (Fratelli d’Italia and Lega) retains a solid lead (close to 5%) over the coalition between Partito Democratico and M5S. Even taking into account the wider centre-right (Fratelli d’Italia, Lega and M5S) and centre-left (PD, 5Star, Az, IV) coalitions, opinion polls point to a solid lead by the centre-right.

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