With the resignation of Prime Minister Giuseppe Conte the future of Italy is now up in the air. There are many things that come into play with Conte resigning before the No-Confidence vote tabled by Lega Leader Matteo Salvini could take place.
The euro popped 40 pips, back above support at $1.11 on the news. The forex markets realize this was a Brussels-friendly move.
Conte didn’t want to chance getting voted out of office. That makes it difficult for President Sergei Mattarella to call for a new government without snap elections. The Italian Senate would have formally rebuked Mattarella’s compromise pick for Prime Minister, Conte.
Conte was there to effectively keep the children in line – Euroskeptics Lega and Five Star Movement (M5S). So, Conte used his time to take the bully pulpit and excoriate Salvini for twenty minutes. This gives the U.S. and European media plenty of chum to make their case against Salvini.
You will hear a lot about how non-partisan Conte did this for the sake of Italy to stop the mad, selfish and unprofessional Salvini from taking power.
It’s good political theater but it’s as disingenuous as the day is long and very much the truth. No one in power in Brussels wants what Salvini is selling. Not many in Rome do either.
Because had he not resigned Mattarella could have faced impeachment for not going to elections. He only relented to let M5S and Lega take power under that threat last year.
So Conte has set the stage for Mattarella to take charge again. They will put the veneer of legitimacy on this process to protect Italy from Salvini. In reality, the only people they are protecting are in Brussels.
Remember, Salvini wants to circumvent EU budget controls through issuing the mini-BOT parallel currency. And current polling puts him at just below the threshold to take power outright.
The downstream effects of this are myriad but there is one big fulcrum on which this hinges.
M5S Leader Luigi Di Maio is now placed to play kingmaker. He can either do a deal with Matteo Renzi and the Democrats (PD), who M5S was formed to oust from power, or he can drag things out to attack Salvini for putting Italy in turmoil and hope for the best in an election.
Mattarella will push for a caretaker government to keep Salvini from power and marginalize M5S as much as possible. The goal is to forestall elections for as long as possible.
That latter path leads to Di Maio trying to shift opinion polls back on his side. Not likely, but hey, deluded people try to manipulate events against the trend all the time.
Salvini forced this crisis because of his persuading the Italian people that not only his future plans are better but so would be his leadership. The coalition has been stymied by both Conte and M5S and M5S’s poll numbers reflect their mission creep.
When that fails, Di Maio will have to make a deal with PD or face elections which will see M5S out of power.
And if he makes that deal, which Brussels and Rome want him to bite on, it will be the beginning of the end of M5S.
But Di Maio is now in the same position that another reformer turned toady was in after he betrayed his country in 2015, Greece’s Alexis Tsipras.
To remind everyone, Tsipras is now out of a job and one of the most hated people in Greece. So complete was his sell out of the Greek people, he ushered back into power a center-right government in July.
Five Star was born out of the disgust Italians had for its leadership in Rome and the technocratic overthrow of Silvio Berlusconi’s government back in 2011.
It was a pure protest party, especially when Beppe Grillo was its figurehead. Now, it’s making deals to stay in power with those same technocrats.
Di Maio has to think very carefully about where things go from here.
Salvini is still in the driver’s seat because a betrayal by M5S of that nature will see Italy ground into a paste. Look no farther than the English Channel to see what Brussels wants to to do the Brits over Brexit. IF you think Italy will be spared after their dalliance with insurrection you are terminally naive.
And Salvini not being a part of that works to his advantage going forward. Sometimes the best way to win a battle is to retreat and let your enemies over-extend themselves.
Di Maio wasn’t a strong enough leader to keep the disparate factions within M5S on mission. He will now pay the price for his lack of vision.