Italian government facing trials


Italy is not at peace politically. In the coming weeks there will be elections and some decisions. The real problems, such as high debt and low efficiency, will probably not be tackled sustainably. The dependence on the ECB and the EU will therefore remain.
On September 20 and 21, elections of the respective parliaments and presidents will take place in seven Italian regions. Despite high personal approval ratings for Prime Minister Conte, the governing PD parties weaken in the election polls. If the PD, which in contrast to the right-wing camp will not run in an alliance with the M5S, does in fact concede one or more defeats, this is likely to be a test for the government in Rome. The head of the PD, Zingaretti, recently commented on the future of the coalition as follows: The PD would remain in the government as long as it provided a benefit to Italy. This is not a reliable political basis.

For weeks now there has been disagreement among coalition members about whether Italy should apply for corona aid from the ESM. While M5S continues to reject the move, the PD is predominantly in favor. Even the parliamentary reform, which was actually already decided last year, is stalled. The reform aimed to reduce the number of seats in both chambers of parliament. However, the final decision will now be made in a referendum. If the majority of Italians vote against the reform, it would be a bitter defeat for M5S and Di Maio personally.
Uncertainty also lies in the upcoming decisions of the rating agencies. S&P has already given Italy's BBB rating a negative outlook since October 2018. In the meantime, there have been decisions on comprehensive EU financial aid. However, it is to be feared that the income from the reconstruction fund in combination with the ECB's bond purchases will reduce the incentive to tackle the problem of high total debt in a targeted manner.

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