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Giorgia Meloni’s Surprising Success

Lucrezia Reichlin, 29 March 2024 - 02 Apr 2024

Giorgia Meloni’s Surprising Success Mar 29, 2024 |LUCREZIA REICHLIN

Italian Prime Minister Giorgia Meloni has proved to be a creative politician who remains popular at home and is poised to wield more influence following the European Parliament elections in June. But the picture for Meloni is not all rosy, particularly as Italy's economic outlook darkens.

LONDON – After almost two years in power, Italian Prime Minister Giorgia Meloni is more popular and influential than ever, not only in Italy but also across the European Union. For the leader of Fratelli d’Italia (Brothers of Italy) – a political party with roots in Italian fascism that, until recently, had relatively few members, no culture of governance, and a firmly anti-EU, anti-euro stance – this is a remarkable achievement.

Meloni leads a three-party coalition with the far-right Lega and the center-right Forza Italia. But the Brothers of Italy enjoy a solid majority. And that is not the only thing that distinguishes it from its coalition partners. Unlike the pro-Russia Matteo Salvini, who leads Lega, Meloni is vocally pro-NATO. This is a major reason why EU leaders – as well as markets – view her in an increasingly positive light.

Meloni is now poised to have lasting influence in European politics, where the Brothers are part of the center-right European Conservatives and Reformists (ECR) Group – of which Meloni is president. Forza Italia, for its part, belongs to the European People’s Party (EPP), while Lega belongs to the Identity and Democracy Group, along with far-right parties like Germany’s Alternative für Deutschland and France’s National Rally.

Already, Meloni is taking advantage of expectations that this June’s European Parliament elections will strengthen the right and weaken the center to boost the ECR’s relevance. While the EPP is leading in the polls, it will have to form a coalition to govern – and it will need ECR votes. Meloni may well seize this opportunity to secure a senior position for the Brothers in exchange for supporting the EPP’s Ursula von der Leyen in her bid for a second term as European Commission president.

To be sure, a formal alliance between the ECR and the EPP, together with the liberals, is unlikely. The ECR’s membership – which includes radical right-wing parties, such as Spain’s Vox, Poland’s Law and Justice (PiS), and new arrivals like France’s Reconquête! – makes the group difficult for mainstream parties to accept.

But pragmatic negotiations and support on specific issues will not be impossible. And here, Meloni might emerge as a key power broker. Amid all the political wheeling and dealing, however, some of the exiting Commission’s commitments, such as its green policy, are likely to be diluted.

Meloni’s impact on European politics is likely to extend beyond the European Parliament. The marriage between a party with roots in fascism, a pro-Russian party, and an EPP member might seem to be an Italian idiosyncrasy, which is unlikely to be repeated. But, so far, it has worked. And if it works in Italy, it could provide a way forward for other political parties in Europe.

In the last two decades or so, voters in many advanced democracies have steadily become less faithful to political parties. There have been large swings in support, and new parties have risen – and sometimes fallen – rapidly. Whereas traditional parties used to offer comprehensive political programs, new movements often focus on narrow issues. As voting becomes increasingly transactional, space for “unnatural” alliances is growing.

But the picture for Meloni is not all rosy. In fact, continued stable support in Italy is far from guaranteed. The Brothers’ rise has been meteoric, with its share of the popular vote soaring from 4% in 2018 to about 27% today. But the party’s strength has been mostly a result of others’ weaknesses. This is true elsewhere in Europe as well: the governments of most EU countries – France, Germany, the Netherlands, Portugal, and Spain – are unlikely to survive the next election. It is also true in Italy, where a divided opposition cannot mount much of a challenge. But Italy’s electorate can be fickle, not least in the face of economic hardship. And while the Italian economy has performed relatively well since the COVID-19 pandemic – better than Germany – the outlook seems to be darkening, as the crisis-response measures, especially generous subsidies to the construction sector, are rolled back.

Italy’s fiscal deficit is projected to reach 4.3% of GDP this year – 0.6 percentage points above the government’s original target – and its net primary expenditure is forecast to violate the EU’s new fiscal rules. Add to that concerns from independent forecasters that growth estimates for 2024 are overly optimistic, and a sharper-than-expected fiscal adjustment seems likely. As four years of government largesse come to an end, growth will decline.

Fortunately, the risk premium on Italian government bonds has not yet been affected. Gone are the days of financial-market instability driven by bets against the euro. But the market is watching Italy’s performance closely, and sentiment may turn.

Though Meloni has proved to be a creative politician – and not the populist many feared she would be – leadership based on others’ weakness is not sustainable. And so far, Meloni has failed to formulate any strategy for addressing Italy’s structural problems, its regional disparities, and the need for reform of the health and pension systems. Sooner or later, voters may well leave the Brothers behind.

LUCREZIA REICHLIN Lucrezia Reichlin, a former director of research at the European Central Bank, is Professor of Economics at the London Business School and a trustee of the International Financial Reporting Standards Foundation

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