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All roads lead to Rome: Italian elections could bring uncertainty back to the eurozone

18 Feb 2013

Ahead of the Italian elections on 24-25 February, Open Europe has today published a new briefing looking at a number of potential post-election scenarios and what each of them would mean for the eurozone and Europe. The latest opinion polls available show that a stable, pro-reform Italian government after the elections is a possibility – but there is also a risk that a new Italian government will fail to press ahead with vital reform, and even reverse some of the progress made.  

Open Europe’s analyst Vincenzo Scarpetta said,

“The uncertainty involved in the Italian elections, and the number of parties explicitly campaigning on an anti-austerity ticket, show just how challenging it will be for the eurozone to stick to its cash-for-discipline blueprint, as the hawkish North continues to clash with the austerity-fatigued South.”

“The Italian political scene will likely remain fragmented. Ironically, for those who want to see the continuation of Monti-style reforms, a hung Senate with Mario Monti as the kingmaker could be the best outcome, but even so, any government would be up against a strong anti-austerity opposition – with Beppe Grillo as the anti-establishment voice – and strong vested interests.

To read Open Europe’s new briefing in full, click here:

Key points

  • The Italian elections have turned into a referendum on fiscal discipline and structural reform. No less than five of the seven main political parties in the race – together polling at around 50% – have pledged to put an end to EU-mandated austerity.
  • Two of these parties – Lega Nord and comedian Beppe Grillo’s Five-Star Movement – are in favour of a referendum on Italy’s euro membership. Together, they could potentially secure over 20% of the vote.
  • The final outcome of the election has become increasingly uncertain throughout the campaign. Somewhat unbelievably, Silvio Berlusconi has been reinvigorated, thanks to a strong populist anti-austerity campaign. Two weeks before the elections, when a ban on opinion polls entered into force, his centre-right alliance was trailing the centre-left coalition led by Pier Luigi Bersani by between 4% and 9%.  
  • This means that, though unlikely, Berlusconi could still win. In 2006, Berlusconi managed to come back and almost win the elections against all odds – despite opinion polls putting him approximately between 3% and 6% behind.
  • Even if he does not win, Berlusconi could stop the centre-left from winning a majority in the Italian Senate – the upper chamber. This would force Bersani to seek allies to form a new government, with Mario Monti’s pro-reform bloc the obvious candidate.
  • An outright victory for Bersani’s centre-left coalition in both chambers would make the formation of the new cabinet smoother, but a self-sufficient centre-left government would be more limited in its reform efforts, not least because of the links to the country’s unions – and is unlikely to push ahead with further changes to Italy’s rigid labour market.
  • Support for Beppe Grillo’s Five-Star Movement could be the real litmus test of these elections. Grillo has made clear that he will not join a coalition government with any of the old establishment parties, and has been calling for a referendum on the euro and the restructuring of Italy’s huge public debt. The various scandals which have been surfacing in Italy over the past few weeks may well give the Five-Star Movement an extra boost. Grillo’s vote share could be seen as the public protest vote against the current state of Italian politics. 
  • Mario Monti has no chance of outright victory, but he could still end up being the kingmaker. If the centre-left wins the elections, but fails to secure a majority in the Italian Senate, the following four scenarios could materialise:


1) For more information, please contact the office on 0044 (0)207 197 2333, or Vincenzo Scarpetta on 0044 (0)796 9240642.

2) Open Europe is an independent think-tank calling for reform of the European Union. Its supporters include: Lord Leach of Fairford, Director, Jardine Matheson Holdings Ltd; Lord Wolfson, Chief Executive, Next Plc; Hugh Sloane, Co-Founder and Chief Executive, Sloane Robinson; Sir Stuart Rose, former Chairman, Marks and Spencer Plc; Jeremy Hosking, Director, Marathon Asset Management; Sir Henry Keswick, Chairman, Jardine Matheson Holdings Ltd; Sir Martin Jacomb, former Chairman, Prudential Plc; Lord Sainsbury of Preston Candover KG, Life President, J Sainsbury Plc; Michael Dobson, Chief Executive, Schroders Plc; David Mayhew, former Chairman, JP Morgan Cazenove; Tom Kremer, Chairman, Seven Towns Ltd; Michael Freeman, Co-founder, Argent property group.

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