By vetoing the appointment of 81-year-old Paolo Savona over the weekend, establishment Italian President Sergio Mattarella all but nullified the vote of the Italian people last March and removed the possibility, at least for now, that the Five Star movement and ultranationalist League “Lega” would form Italy’s new coalition government.
The move has had a big impact on world stock markets as it pertains to Italy possibly leaving the Euro. The NYSE is substantially down in trading.
Mattarella was quoted as saying he is acting in the best interest of the Italian people, “The adhesion to the euro is a choice of fundamental importance for the perspectives of our country and our youth. If you want to talk about it, we need to do it openly and with a serious, in-depth analysis.”
Mattarella’s move comes on the heels of Silvio Berlusconi’s refusal earlier this month to stand aside and let the populist coalition form a new government. The four-time prime minister is considered one of the main obstacles to the formation of a new Italian government. As a consequence, Italy has a hung parliament and new election is coming.
Why It Impacts Markets
Market analysts have warned that an Italian effort to abandon the Euro would rattle not just European investors, but also U.S. markets.
Oxford Economics analysts Jamie Thomson and Nicola Nobile used dramatic language recently saying, “Ditching the euro would bring a halt to not only the ‘euroboom,’ but also the process of U.S. monetary normalization, with the market reaction comparable to the eurozone debt crisis.”
Other analysts however suggest fears about an “Italexit” are overblown.
Marshall Gittler, a well known global monetary strategist said, “I don’t think Italy will leave the euro. Support for the euro in Italy has never been below 58%, and most recently was 59%, with only 31% opposed.”
Five Star and The League Fight Back
Leaders with the Five Star Movement and the League, the parties that convincingly won the election last March, called Mattarella’s actions “unacceptable” and, in a rare move, called for his impeachment.
In a interview with Sky News at a rally in Rome, Luigi Di Maio, leader of the Five Star Movement, said “They’ve replaced a government with a majority with one that won’t obtain one.”
League Leader Matteo Salvini raged against the establishment. Salvini said, “The upcoming elections will not be political, but instead a real and true referendum … between who wants Italy to be a free country and who wants it to be servile and enslaved. Today Italy is not free; it is occupied financially by Germans, French and eurocrats.”
The reason they have not yet been able to form a government is because in Italy, the two houses of parliament are equally powerful and the approval of both is needed to form a government. Since no coalition has a majority in either, deals need to be struck if a new election is to be avoided. And those deals aren’t being reached, hence a new election.
Italians Back To The Polls
Italians will head back to the polls either this summer or early next year.
A new poll found that a majority of Italians disagreed with Mattarella’s decision to veto Savona’s appointment.
Alberto Nardelli works as the Europe Editor for politics for Buzzfeed. His tweet conveyed the results of that poll as Italians grow more frustrated with the establishment:
35% of Italian voters think Mattarella was wrong and incorrect
24% say president was institutionally correct, but should have accepted the proposal given the situation
26% think decision was correct and right pic.twitter.com/ItKItQUu7j
— Alberto Nardelli (@AlbertoNardelli) May 28, 2018
It also found support surging for the League or Lega, a party that seeks mass deportations of undocumented immigrants. The Lega and Five Star have nearly 60% of the vote between the two.
It now seems possible that the League could siphon support further from both the center-right and even the Five Star Movement, and emerge as the most influential player in Italian politics.