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Italy’s Far-Right Favorite Aims to Stick to EU Budget Rules
(Bloomberg) -- Far-right leader Giorgia Meloni, who is riding high in opinion polls ahead of Italy’s September election, plans to stick to European Union budget rules if she leads the next government, according to officials familiar with her thinking.
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Officials advising Meloni are also confident that her Brothers of Italy party won’t put at risk the reforms needed to unlock funds for the country from the EU, if she succeeds Prime Minister Mario Draghi after the Sept. 25 election at the head of a center-right coalition.
Her stance is at odds with her partners’ public positions.
Italian bonds swung to gains, narrowing the 10-year yield premium over German peers -- a major gauge of risk in the region -- by 11 basis points to 224 basis points, the lowest in more than a week.
Investors have shown concern that the end of Draghi’s government will mark the end of a phase of stability and modernizing reforms in Italy. S&P Global Ratings lowered its outlook for the country’s sovereign debt on Tuesday, and the spread between Italy’s 10-year bonds and their German equivalent -- a key gauge of risk -- widened to 234 basis points.
Meloni and her allies are drafting policy plans to make sure that their government would have the backing of international partners, including the US and the European Union, and of President Sergio Mattarella whose task it is to pick a premier-designate, according to party officials familiar with her thinking. A right-wing government would crack down on illegal immigration.
‘Comforting Signal’
“The headlines on the far right planning to stick to the EU budget rules are a comforting signal,” said Piet Christiansen, chief strategist at Danske Bank AS. “However, with the volatility and uncertainty in markets right now, I’m yet to be convinced of going long BTPs.”
Meloni’s program for government would include continuing Draghi’s staunch military support to Ukraine after Russia’s invasion, the people said.
“Brothers of Italy will never question military support to Ukraine,” Giovanbattista Fazzolari, a senior lawmaker for Brothers of Italy who is advising Meloni on the party’s program, said in an interview. “On the contrary, it is the best guarantee that support will continue.”
That contrasts with her ally Matteo Salvini of the anti-migrant League, who has had strong ties with Russia and tried to visit Moscow after the invasion in what he described as an attempt to broker peace talks.
Post-Fascist Roots
Meloni, who began her political career in the youth wing of the post-fascist Italian Socialist Movement, has long sought to conquer Italy’s mainstream. She told newspaper La Stampa at the weekend that her foreign policy won’t break away from Draghi’s position and that her party will continue to back support for Ukraine. She added that a government led by her would support pro-EU policies.
On public finances, Fazzolari said that “economic growth is the best bet for Italy to re-pay its debt.” His words echoed Draghi’s frequent calls for Italy to boost economic growth.
Meloni’s party abstained in a vote on the recovery package Draghi presented to lawmakers in 2021. She told La Stampa that the government did not allow sufficient time to read it. “Now I have read it and I think Italy is not using funds in the areas in which it is more competitive,” she said.
The League’s Salvini, who has clashed with Brussels repeatedly in the past, had called on Draghi to widen its deficit to finance new measures. Even so, the League eventually always backed the outgoing prime minister’s careful management of public finances.
Tax Amnesties
Still, economic policies are set to reflect right-wing measures, other party officials said. The main change is going to be how the coalition allies allocate available funds. This will be reflected in likely tax amnesties and less direct cash benefits, according to officials from Brothers of Italy and the League.
Ex-premier Silvio Berlusconi, the leader of the center-right Forza Italia, has promised that he will introduce a universal minimum pension of 1000 euros ($1,023.7), a measure that would cost about 33 billion euros annually, according to research published by the website Lavoce.info. As recently as mid-July, Salvini urged Draghi to borrow 50 billion euros additional euros to finance tax amnesties and other measures.
The coalition’s official government proposals will only be made available in coming weeks, when parties also have to agree on parliamentary candidates.
“Meloni has been very good at differentiating herself from mainstream parties without scaring voters off,” said Marta Lorimer, an expert in far-right movements at the London School of Economics. “While Orban remains a great source of inspiration for all right-wing parties, she won’t campaign on an anti-euro agenda like Salvini once did and her economic policies will focus more on cutting taxes than on state intervention.”
A recent study by the European Council on Foreign Relations portrayed her voters as more skeptical about the war in Ukraine than her statements would suggest. More than half of her voters are against sending weapons to Ukraine and more than 30% of her supporters blame the West and Ukraine for the war.
While the right won’t push too hard on foreign policy and the economy, Meloni and her allies will advocate flagship policies including changing the constitution to have the president elected directly by Italian voters. Winning a wide parliamentary majority could make that within reach.
Italy’s Right Has an Orban-Style Super Majority Within Reach
If she becomes premier, Meloni would bring far-right parties into the European mainstream, offering Hungarian Prime Minister Viktor Orban a powerful ally in Brussels. Long shunned, radical right parties such as that of France’s Marine Le Pen are gradually being considered acceptable governing partners by conservatives and other groupings.
(Updates with latest market reaction in fourth paragraph)
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