President of Veneto region Luca Zaia speaks with journalists as he waits the results of Veneto's autonomy referendum in Venice, Italy, October 22, 2017. REUTERS/Manuel Silvestri - RC1439D13140

Veneto Regional Governor Luca Zaia is emerging as the most likely – and possibly the only – candidate to become Italy’s next prime minister after the victory by anti-European protest party Movimento 5 Stelle (M5S) on March 4.

Zaia is both a member of the Northern League, whose party came first in the center-right coalition led by media tycoon and former prime minister Silvio Berlusconi, and an effective regional governor whose popularity transcends party and geographic boundaries.

In an interview with Capitol Intelligence at a regional agriculture trade show, Antica Fiera Godega Sant’Urbano, near Treviso, Zaia said he has no ambitions other than serving the “Venetian people” as their elected governor.

While Zaia says he supports the candidacy of his party leader, Matteo Salvini, to form a new government, the anti-immigrant Salvini will find it difficult to reach a consensus among his own center-right allies, much less convince those outside the coalition to join forces to create a working parliamentary majority.

Not expecting to be overtaken (“sorpasso”) by his once junior partner, Berlusconi said the party with the most votes within the coalition would name the candidate for premier. The Northern League won 17.6% of the vote compared to 14.4% by Berlusconi’s Forza Italia.

Notwithstanding Zaia’s apparent humility, the Veneto governor is visibly excited by the possibility of implementing two of the Northern League’s most cherished reforms: fiscal autonomy for Italian regions and the institution of a flat tax.

Just ahead of the elections, outgoing prime minister Paolo Gentiloni along with Veneto’s Zaia, Lombardy Governor Roberto Maroni and center-left governor of Emilia-Romagna Stefano Bonaccini signed a general framework agreement to establish regional autonomy in tax collections and expenditures.

The signing ceremony at Palazzo Chigi (the Prime Minister Office) in Rome was an extremely rare demonstration of bipartisan agreement between the Northern League of Zaia and Maroni and the center-left Partito Democratico of Gentiloni and Renzi.

In fact, the outgoing governor of Lombardy and close Zaia ally, Roberto Maroni, began the process of opening the debate of greater regional autonomy with fellow regional governors on the left such as a Bonaccini and others.

Zaia and Maroni were only able to cross the political divide as the regions of Lombardy and Veneto are both showing strong economic growth and optimism while the rest of Italy remains stagnant or in recession

Zaia and Maroni were only able to cross the political divide as the regions of Lombardy and Veneto are both showing strong economic growth and optimism while the rest of Italy remains stagnant or in recession, with youth unemployment up to a staggering 60% or more in the south.

The Veneto region is marked by the strength of small to medium size companies led by local entrepreneurs coupled with global giants such as the Agordo (Belluno) Veneto-based Luxottica Group and the Benetton family empire.

Zaia is a unique political figure in Italy as he has strong grass-roots support among constituents and at the same time the trust and confidence of Veneto regions biggest employers such as Luxottica founder and owner Leonardo Del Vecchio and Benetton family patriarchs, Luciano and Gilberto Benetton.

Veneto is also home to local global players such as Verona-based Calzedonia Holding SpA, a €2bn group in the pantyhose, shorts and beachwear sectors founded by local entrepreneur Sandro Veronesi.

Calzedonia was forced to expand into the new markets of Eastern Europe to maintain sales growth and profit margins against slipping sales and rising costs in the Italian market.

In fact, Calzedonia is aggressively expanding both in the United States and Africa. Calzedonia is the first major Italian clothing company (apart from Benetton in Sousse, Tunisia, that has opened a major manufacturing plant in Africa in Addis Ababa, Ethiopia.

The aggressive expansion in the United States, combined with its decision to open a manufacturing plant in East Africa, now makes Calzedonia the most attractive buyout target for major private equity firms such as Washington, DC-based The Carlyle Group, which is led in Milan by former TIM CEO Marco De Benedetti, Milan-based M&A lawyers told Capitol Intelligence.

The Veneto region itself is a model of how a new flat tax in Italy would work. Already, a large percentage of Veneto factory workers opt to be paid by a Partita IVA (a form of LLC) at a rate of 17%-19% rather than take a salary with its increased tax burden (circa 60%) and illusory “job for life” guarantees.

The Partita Iva, and a record number of business owners in Veneto, also makes Zaia’s Veneto model ideal to increase employment among Italian youth and at the same time promote near US-style labor mobility.

“The Italian system became a system where the entitled created a monopoly so they would not face competition from others,” said one Milan banker. “However, the monopoly was not able to compete with foreign markets so the system has collapsed under its own inefficiency.

Italian success stories are almost exclusively when a new venture uses creative means to get around the State and its local politicians such as Milan stock exchange listed H-Farm start-up incubator located in the countryside between Treviso and Venice.

The incubator — financially backed by Diesel clothing founder Renzo Rossi – fundamentally disrupts the consultancy marketplace of Ernst & Young, PWC, Deloitte, and Accenture by working directly with major companies such as Luxottica, Deutsche Bank and Allianz to brainstorm innovation and new business strategy.

The outcome of the Italian elections left no political party or coalition with a majority. The M5S protest party – founded and dictated by anti-European Union ideologue Beppe Grillo – came first with some 32% of the vote and a near monopoly over Italy’s economically depressed and organized crime-infested southern Italy (Mezzogiorno) while the center-left Partito Democratico (PD) of former prime minister Matteo Renzi came in last with a little over 19%.

The complete debacle of Italy’s former elites such as Berlusconi and Renzi opens up the field for new political leadership in the form of Luca Zaia, who was respected abroad when he served as minister of agriculture from 2008 to 2010 under Berlusconi.

“You see how Zaia is a superstar at this local fair [Godega Sant’Urbano] but it was the same when he went to a big agriculture fair in Berlin and he was mobbed by European politicians and farmers, said Corriere del Veneto political editor Alessandro Zuin.

The only agreement by the center-right of Berlusconi and the center-left of Renzi is an agreement not to join forces with the Movimento 5 Stelle led by Luigi di Maio ahead of consultations with President Sergio Mattarella over who can, or is able, to form a majority government.

Zaia and other political leaders also claim they have little appetite to appoint a technical government or head back to new elections. The only person who would find overwhelming public support to head a technical government remains European Central Bank President Mario Draghi, whose term ends later in 2019.  

There is already a movement in Italy to draft Draghi as a national unity candidate made up of Italy’s top business, legal and political minds.

So it Is up to Berlusconi to rustle up some two dozen deputies either through (motivated) defections from M5S and at the time win support in principle from the PD. While Salvini’s and Beppe Grillo’s anti-immigrant and anti-euro politics remains anathema to the vast majority of pro-European Italians, Luca Zaia is becoming the only attractive choice as Italy’s next leader.

Copyright of Capitol Intelligence Group – Turning Swords into Equity®

Peter K Semler is the chief executive editor and founder of Capitol Intelligence. Previously, he was the Washington, DC, bureau chief for Mergermarket (Dealreporter/Debtwire) of the Financial Times and headed political and economic coverage of the US House of Representatives and Senate.

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