The House of Cards

Without Italy, there is no Europe, but outside of Europe, there is even less Italy.

-Niels C. Jensen

A summer of chaos

In July, Italian Prime Minister, Mario Draghi demanded loyalty from all members of his coalition government. It was a gamble, and he lost. The demand was flatly rejected by three of the four parties in the coalition – Movimento Cinque Stelle, Forza Italia and Lega. Now, Italy is again looking like the Italy of yesteryear; a country embraced by political chaos after a relatively calm period under Draghi’s stewardship.

The next step in the unfolding crisis is a general election, which will take place on the 25th of September. With just over three weeks to go before election day, the right-wing coalition, consisting of Fratelli d’Italia (FdI), Lega and Forza Italia (FI) retains a comfortable lead over the centre-left coalition, consisting of the Democratic Party (PD), Azione & +Europa (A/+E), Sinistra (AVS) and Italia Viva (IV) (Exhibit 1).

Exhibit 1: Latest election poll results in Italy

Sources: PolitPro

It is worth noting that, within the right-wing coalition that stands to win, there is a fair amount of euro scepticism; however, Italian corporates, which typically support one of the three right-wing parties, are keen to close that exit door once and for all.

You may also wonder why I have made no mention of Movimento Cinque Stelle (M5S). M5S is the biggest party in the current parliament; however, it is effectively two distinct parties today, frequently at loggerheads with each other (you can read more about that here). As you can see in Exhibit 1, M5S stands to lose a huge number of votes, most of which will probably go to the euro-sceptic FdI. After having served in various governments since the last general election in March 2018, M5S stands to be decimated and seems unwilling to join a new government until the dust has settled.