Italy government

Italian government wavers on how to revive economy after Covid-19

ROME—In the depths of the pandemic, a sign of normality is returning to Italy: political instability.

Prime Minister Giuseppe Conte’s government is struggling to avoid collapse after a small coalition member threatened to withdraw vital parliamentary support. The Italia Viva party, led by former Italian Prime Minister Matteo Renzi, has long been skeptical of Mr Conte’s leadership and is pushing on a range of issues including how to rebuild Italy’s battered economy after the pandemic.

If Mr. Renzi pulls out of the coalition, forcing Mr. Conte to resign, the possible outcomes range from a new government with the same center-left leaders to a snap election that a rival center-right alliance would likely win.

Many observers predict that Mr. Conte will continue, although Mr. Renzi’s small party will carry more weight. Whatever the outcome, the brawl shows that the surprising stability of Italian politics during the pandemic is coming to an end.

Mr Conte, a little-known law professor chosen to lead two rickety coalition governments in 2018 and 2019, has emerged as a surprisingly strong prime minister since last year, when Italy became the first Western country to be badly hit by Covid. -19. His approval rating rose as he worked with allies and opposition parties to orchestrate the first nationwide lockdown, using tough measures that were quickly adopted around the world.

But Italy’s success in containing the virus last summer has given way to a resurgence in the contagion since the fall, widespread fatigue with long restrictions on daily life and growing fears for the national economy.

The political class in Rome is pinning its hopes on the massive economic stimulus funding that the European Union is channeling to hard-hit member countries. Italy is expected to be the biggest recipient of EU aid, with more than 200 billion euros in grants and cheap loans from the EU effort.

The sheer scale of the money – and the sense that it could be a once-in-a-lifetime opportunity to revitalize an Italian economy that has struggled to grow over the past two decades – is fueling instability in government. Mr. Renzi attacked Mr. Conte’s economic plans as not up to the task.

On Friday, the ruling coalition – which mainly includes the center-left Democratic Party and the ideologically eclectic and anti-establishment 5 Star Movement – was locked in talks to find a way to avoid collapse.

Italy has not had the money to consider such ambitious economic recovery plans for many years. The country has one of the highest national debt burdens in the world, mostly inherited from the spendthrift 1980s, forcing Rome to manage tight budgets over the past quarter-century.

Former Prime Minister Matteo Renzi leads the Italia Viva party.


Photo:

Roberto Monaldo/Zuma Press

Weak public investment has contributed to Italy’s low growth rates, which have rarely exceeded 1% per year in recent times, and left the country behind others in areas such as higher education and infrastructure.

Mr Renzi, as prime minister from 2014 to 2016, briefly carried popular hopes for economic renewal, but his party would now struggle to win seats in parliament if a snap election were held. In recent weeks he has attacked Mr Conte’s attempt to control how EU funds are spent. Mr. Conte wanted to set up a tightly controlled committee made up of a few private sector ministers and managers to oversee the funds, involving no members of Mr. Renzi’s party.

Mr. Conte, struggling to preserve his parliamentary majority, made a number of concessions to Mr. Renzi’s demands, including scrapping the controversial committee and promising more money for the health sector. So far, the former prime minister is unhappy and the fate of the government continues to hang in the balance.

Write to Giovanni Legorano at giovanni.legorano@wsj.com

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Appeared in the print edition of January 11, 2021 under the title “The Italian government switches to the post-Covid plan”.