Italy holds Regional and Local Elections this Weekend

There is a specter haunting Europe. It is a specter that rejects the status quo.  Last weekend, Spain's ruling PP lost majorities in all key municipalities and regional governments.  The opposition itself is fragmented, and nine of the ten major municipalities will be run by what appears to be loose coalitions. One wag said that it was as if Spain got Italian political results with the Italians to manage it.  

Italy holds its local elections this weekend in seven regions and more than a thousand municipalities.  Prime Minister Renzi's PD coalition is being squeezed from all sides, including the inside.  The left-wing of Renzi's coalition has not been happy with some of Renzi's reform agenda.  The labor market reforms were seen as too neoliberal and the electoral reforms, it argues, weaken the independence of parliament, a most important democratic institution.  Renzi is the third consecutive unelected Italian Prime Minister. 

Grillo's 5-Star Movement may draw some inspiration from the Spanish results.  However, infighting within the party, and the lack of a coherent affirmative program may limit its ability to build on its base of about 20% of the Italian electorate.  It is the second largest party in Italy.      

There is a vacuum created by the long-anticipated waning of Berlusconi, the last elected Prime Minister.  The far-right Northern League is trying to broaden its appeal and pick up some Berlusconi supporters.  Moreover, the party's leader, (shares the same first name--Matteo--with Renzi) Salvini is charismatic and the second most popular Italian politician behind the Prime Minister.   He has taken advantage of local developments to push an anti-immigrant line.   The Northern League, which formed an alliance with France's National Front in the EU Parliament, is projected to receive as much as 15% of the overall vote, up from 5% a couple of years ago.  

Seven of Italy's 20 regions hold elections.  The polls suggest that the PD will likely win four.  Three would be disappointing.  Support for the PD is expected to slip toward 35% from a little more than 40% in last year's EU Parliamentary elections. 

There are two regional elections that are drawing attention.  The first is Liguria.  It is seen as a litmus test for Toti, a potential successor of Berlusconi.   He benefits from the split in the PD, which currently governs the region.  The PD is of course running its own candidate, but there is also an insurgent challenge by a disaffected former PD member.  

The second region is Campania,   where the PD candidate for regional president is appealing a conviction for abuse of his public office in 2008. Polls give De Luca a narrow lead over the center-right incumbent Caldoro.  Even if he wins, De Luca may be forced to step down if he loses his appeal, as convicted criminals are barred from holding public office.  Renzi has backed De Luca out of what appears to be political expediency.  

Renzi is pinning his hopes on two other factors:  The economy and appointments.  The economy is recovering.  Recall Renzi had pushed his predecessor out of the premiership last year when the economy appeared to have posted a positive quarter of growth for only the second time since 2011.  However, this was later revised away. Today Italy reported 0.3% growth in Q1 and revised up Q4 growth to 0.01% from -0.03%. Italy also reported that after flirting with deflation, the preliminary EUharmonized CPI rose 0.3% year-over-year, the highest reading since last November.  Next week Italy will report that unemployment remains stubbornly high near 13%.  It is nearly twice as high for young people.   The failure of Spain's PP to be rewarded for the country's economic recovery should be a cautionary sign.  

The Italian government continues to have stakes in large Italian companies.  The Prime Minister appoints the government's representatives.  These are much sought after positions and some link Renzi's move last year against Letta as partly driven by the timing of these appointments.  Renzi has already made some appointments and more are expected to be forthcoming by the end of next month. 

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