The Italian people are going to cast their vote on the 4th of March. As the third largest economy of the EU and eighth largest (by nominal GDP) globally, these elections aren’t just crucial, they could determine the destiny of the bloc. After all, Italy is one of the founding members of the European Union so, without further ado, let’s break these elections down.
Three significant changes have been made to Italy’s electoral system in the past 25 years – the most recent one just last year, when the “Rosatellum” system was enacted. The Rosatellum system takes its name from Ettore Rosato, a Member of Parliament representing the center-left Democratic party, who actually wrote the details of the system. Basically, the Rosatellum is a parallel voting system, where 61% of seats (193 in the upper House and 386 in the lower House) are awarded equal, national representation.
Then 37% of seats (116 in the upper House and 232 in the lower House) are allocated using the first-past-the-post method (FPTP). With the FPTP method, voters are asked to indicate their candidate of choice on their ballot and the candidate with the most votes wins. Simply put, the FPTP method is the classic ‘winner takes all’. Then the remaining 2% of seats are reserved for Italians that live abroad (6 seats in the upper House and 12 seats in the lower House).
Parties must then achieve 3% of the national vote to win a part of the proportional seats, which was a measure taken in an attempt to avoid fragmentation within the Parliament. If a party is in a collation with a bigger party and gets 1-3% of votes, then those votes are shifted to the larger party, as long as that bigger party has achieved the 3% minimum.
Image courtesy of OpenParlamento
Led by ex-Prime Minister Matteo Renzi, the center-left Democratic Party (PD) is essentially the backbone of the current governing coalition, led by the current Prime Minister, Paolo Gentiloni. The PD first made its appearance in 2007 and tends to support not only pro-European policies but the social incorporation of immigrants. They have been governing Italy since 2013, which is a period very much associated with economic improvements following the 2008 global financial crisis.
FIVE STAR MOVEMENT
The Five Star Movement (M5S) first made their appearance in 2013’s general election, when they won approximately 25% of votes, establishing themselves as a primary power in Italy. Created by comedian and blogger Beppe Grillo and internet consultant Gianroberto Casaleggio (succeeded by his son Davide Casaleggio), the M5S wants to expose and fight corruption and encourage direct democracy. Luigi Di Maio is the M5S’s leader and also serves as the Vice President of Chamber of Deputies. Internal divisions, lack of experience and mismanagement in Rome where the M5S holds mayor-ship, has put them in the spotlight.
This is Mr. Berlusconi’s center-right party (FI) which has had a major influence on Italy’s policies since its first appearance in 1994, when media proprietor Berlusconi, first announced his candidacy. Even as the opposing party (1996-2001 and 2006-2008), FI has served as the primary political conservative force. FI was at its heights in 2008 when Mr. Berlusconi was re-elected as Italy’s prime minister for the third time, but support for FI fell sharply, by 15% to be exact, when it came to light that Mr. Berlusconi was involved in multiple scandals and was accused of mismanaging the debt-crisis. Of course, after that, Mr. Berlusconi was forced to resign from Prime Minister. Now 81 years old, Mr. Berlusconi has been banned from public office because of a tax-related conviction but still leads FI’s campaigns. FI’s comeback was noticed last year in regional and municipal elections, seizing control of Genoa and Sicily’s governorship.
Euro-sceptic, anti-immigrant party Northern League (LN) first made its appearance in 1991, which essentially makes it the oldest party in parliament. Support in opinion polls sharply increased over the last three years due to growing anti-immigration sentiment as a result of the immigration crisis. In the last general election, they were a small part of the center-right coalition. This time’s elections may see them providing similar support to Forza Italia.
FREE AND EQUAL
After Mr. Renzi’s constitutional reform was voted down in 2016’s referendum, left-wing opposers, Veterans Pier Luigi Bersani and Massimo D’Alema, who very critical of the PD and Renzi, withdrew from the party and went on to form their own force – Free and Equal (LeU). Led by Senate President and anti-mafia magistrate Pietro Grasso, the LeU aims to collect votes from fanatic left-wings who particularly dislike Renzi and the PD. Critics are saying that their running separately is paving the path for an M5S or FI win.
BOTHERS OF ITALY
Nationalist and conservative party, Brothers of Italy (FdI) is led by Giorgia Meloni, who served as minister in one of Berlusconi’s previous governments. The name FdI reflects Italy’s national anthem and their ideologies are firmly against globalization and immigration. Taking over after the Italian Social movement in post-war Italy, they have now become the main fascist Italian party.
Now we know who the Italian people are going to the polls for, but what are the potential outcomes? Well, looking at Germany and its lack of government, a coalition sounds more and more likely with every passing minute. However, if a coalition proves to be impossible then a second election may also be on the table.
THE GRAND CENTRE-RIGHT AND CENTRE-LEFT COALITION
This coalition according to recent polls, is one of the most likely ones. What it would mean for the Italian people is a technocratic government, with the ultimate goal being the maintenance of economic stability. Italy’s president Sergio Mattarella would be the director of this coalition. With the Brothers of Italy and Northern League parties probably not too keen to jump on board, this coalition could prove to be much narrower. The question on everyone’s mind is whether votes for the two parties can add up to the 50% minimum and get them the majority they need in the House of Parliament.
THE ANTI-EURO BROTHERS OF ITALY, NORTHERN LEAGUE, AND FIVE STAR MOVEMENT COALITION
A damaging scenario for the European Union would be if the M5S movement managed decent numbers. The M5S is looking to form a coalition with a party that questions the Euro, wants to review Italy’s NATO membership and implement rough immigration policies. Even within the “anti-establishment” parties, it still remains unclear in which areas they find common ground.
COMPROMISE – A FUDGE
This outcome has ranked first in national opinion polls. Essentially, what this means, is an unstable and weak coalition or even worse, a minority government with lawmakers swaying towards wherever there are votes to be gained.
If no coalition can be agreed upon, then this scenario starts looking more likely and Mr. Mattarella will have to call the Italian people to the polls again. This, of course, would bring political uncertainty and the picture starts looking very similar to that of Spain’s over the past few years.
WHY THESE ELECTIONS MATTER
With Germany’s political skies also clouded with uncertainty, everyone is hoping for no further fragmentation. Over the last couple of years, not just Italy but numerous EU members, have seen a significant rise in populist and anti-establishment sentiment. It’s movements like the M5S that have sprouted from these kinds of opinions. The new electoral system will also be closely examined as it’s being said that the Rosatellum was designed to marginalize parties like the M5S and favor the more mainstream ones.
Truth is no one knows what will happen to the EUR but based on the fact that history tends to repeat itself this is what we can deduce. If the markets show signs of worry after the elections or if the Eurosceptics manage a majority, we could see the EUR take a dive. If we’re surprised and Berlusconi’s coalition manages 40% combined with quick negotiations regarding the formation of a government (less uncertainty), then we’re likely to see the Common Currency appreciate. Should the new Italian Government prove unable to manage the country’s major, impending issues (debt-crisis, weaker than expected growth, banking system) then again, we could see the EUR depreciate.
We can expect to see considerable volatility on the charts throughout the elections, especially given the fact that Germany has yet to form an official government. They are after all, in the EU’s top three. Regardless of the outcome, hung parliament or not, you can catch the news as it unfolds with Europe’s Favorite Broker.
This article is for educational and informative purposes only and should not be considered as investment or trading advice.