Italian Election Primer: Game of Coalition

Italian general elections will be held on March 4, 2018. The key to power lies not just in forging allegiances, but navigating complex new electoral laws. The election comes against an improving economic picture and Italian equities have performed strongly over the last year, outpacing many other developed markets including the broader eurozone and the U.S. The iShares U.S. ETF Investment Strategy teams offers a pre-election primer and
considers market implications.

Key points:

  • Our base case for the March 4 Italian general elections is a hung Parliament leading to a grand coalition between the major centrist parties. However, we encourage investors to follow the election in case of a surprise showing by populist parties leading to renewed questions over the future of the eurozone.
  • The election occurs against a backdrop of an improving Italian economy and strong equity performance over the last 12 months.
  • The fact that Italian fundamentals appear to be on an improving trend limits the material downside to risk assets from political developments.


The election will be fought between three main blocks:

  1. The center-right: A coalition of parties including Forward Italy (Forza Italia), Northern League (Lega Nord) and Brothers of Italy (Fratelli d’Italia), led by former Prime Minister Silvio Berlusconi for Forward Italy and Matteo Salvini of Northern League (who do not always agree), and Giorgia Meloni for the far-right Brothers of Italy.
  2. The center-left: anchored by Democratic Party (Partito Democratico or PD) with a few small parties, PD being led by Matteo Renzi.
  3. Independent anti-establishment movement: Five Star Movement (Movimento 5 Stelle or M5S) led by Luigi di Maio, which has positioned itself as distinct from other parties and resistant to forming coalitions with them.

The challenge for each of these parties is a new, untested electoral law known colloquially as “Rosatellum,” which means that for the first time since 2001, voters will vote not just for a party, but for a candidate in a first-past-the-post race in their local community.1 One third of the seats are assigned by the first-past-the-post (uninominal) system and the remainder according to a full proportional system. Theoretically, even as little as 40% of the votes, depending on the performance of uninominal colleges, could be enough for a single party or coalition to get an absolute majority in Parliament.