The Prime Minister of Italy answers questions at the press conference at the end of the year.
Alessandra Benedetti – Corbis | Corbis News | Getty Images
Italy is on the verge of another political crisis as coalition government members question the prime minister’s plan for economic recovery.
The Southern European nation is no stranger to political conflicts; tensions, scandals and small majorities have led to more than 60 governments since World War II. However, the latest political dispute comes at a particularly painful moment, with the number of coronavirus infections and deaths among the highest to date in Europe and the forecast of its gross domestic product (GDP) shrunk by about 10% in 2020.
“In the most likely scenario, the crisis will lead to the establishment of a new executive,” Wolfango Piccoli, co-president of the consulting firm Teneo, said in a note on Monday.
Prime Minister Giuseppe Conte has been in power since June 2018, but he is already heading his second government after a political dispute erupted in the summer of 2019 on a new coalition consisting of the left-wing Democratic Party and the Five-star movement left-wing party, in government.
The Gordian knot is how to spend EU funds and allocate them to new or existing projects.
Alberto Alemanno
Professor, HEC Business School
The latest challenge brings Conte, without political affiliation, against former Prime Minister Matteo Renzi, who defected from the Democratic Party in September and formed his own group called Italia Viva, which supports the coalition and has two ministerial posts. However, Renzi threatens to withdraw his support for the current executive, arguing that Conte’s economic recovery plan is not ambitious enough.
The European Union has agreed to leverage financial markets in search of 750 billion euros ($ 920 billion), which will be invested in the 27 countries to help them revive their economies following the coronavirus pandemic.
Italy is one of the largest beneficiaries of these funds and expects around 208 billion euros in grants and loans with low interest rates. The challenge, however, is how to make the most of this money, as Italy has the second highest government debt pile in the EU and its economy has already struggled before the pandemic.
“The Gordian knot is how to spend EU funds and allocate them to new or existing projects. While the former would further increase Italy’s record high public debt, the latter would reduce the positive impact of EU financial support,” said Alberto. Alemanno, professor of EU law at the HEC Paris Business School, told CNBC on Tuesday.
Experts like Piccoli of Teneo believe the dispute will come to a head later this week when Conte submits his revised economic recovery plan to Cabinet for approval. The reason for the formal start of the crisis may be the refusal by Italia Viva’s two ministers. to endorse the plan. ‘
“Although Italia Viva is only a junior partner in the ruling coalition, the numbers in parliament, especially in the Senate, are so strict that it could cause a vote of confidence in the Prime Minister by withdrawing his support,” he said. added.
Ignazio Corrao, an independent Italian lawmaker in the European Parliament, told CNBC on Tuesday that a speedy election was likely to be avoided and that there would be a new prime minister, or that there would be a cabinet reshuffle.
Renzi ‘must use all the political means he has now … to have powers in the future’, Corrao said, suggesting that the political dispute could be a tactic for the newly formed Italia Viva party to gain more ground. win.
The yield on the Italian bond for ten years has risen slightly this week as markets opened for the first trading days of 2021 and thanks to the political situation. However, yields are still trading at low levels at around 0.532% due to the large amount of monetary and fiscal stimulus in Europe.