After investors hailed for a brief moment Italian President Sergio Matterella’s stand against a fledging populist coalition, a sense of dread began to set in. Matterella’s move to foil the League party and Five Star Movement’s bid to form a government forestalled the installation of an anti-euro finance minister, but may ultimately make the newly-formed, anti-euro alliance an even more powerful force.
What comes next could be a nightmare scenario for those hoping to blunt the determination of Italy’s populists to enact policies which many fear will prove disastrous for Italy’s debt solvency. The prospect of tax cuts along with a massive increase in entitlements has already triggered a selloff in Italian bonds. If new elections are held, despite the market turmoil the populists have caused, some analysts say they will only be emboldened.
An election simulation conducted by the Bologna-based Cattaneo Institute, as reported by Italy’s Ansa news agency, found that the League-Five Star coalition would sweep elections across most of the country, winning more than 90% of uninominal parliamentary elections. Just over one-third of the seats in both the Senate and the Chamber are awarded based on a direct first-past-the-post basis (uninominal), with voters electing specific candidates.
More than 90% of that uninominal vote will give the League-Five Star juggernaut around 35% of the seats in parliament just to start with. The remaining seats, which are awarded on a proportional basis between parties, would give them a two-thirds majority, according to Cattaneo’s projection. That represents a 15% bonus over what they achieved in the March elections.
The upshot: All the populists have to do is sit back and let the establishment attack them until the election, and clean up.