Italy government

The Italian government is at breaking point, here’s why it’s all wrong

(From L) Italian Deputy Prime Minister and Minister of Economic Development, Labor and Social Policies Luigi Di Maio, Italian Prime Minister Giuseppe Conte and Italian Deputy Prime Minister and Interior Minister Matteo Salvini , October 15, 2018.

NurPhoto | NurPhoto | Getty Images

Tensions within Italy’s coalition government appear to be growing, with differences of opinion between the ruling Lega party and the 5 Star Movement (M5S) becoming more pronounced.

Created a year ago following an inconclusive general election, an alliance between the right-wing Lega and the anti-establishment M5S had raised eyebrows from the start, but it now looks increasingly likely that the coalition could collapse and cause new elections.

The ruling parties and their leaders – Matteo Salvini of the Lega and Luigi Di Maio of the M5S, both deputy prime ministers – appeared united last year in their 2019 budget as they pledged to cut taxes and increase social spending.

They also appeared united in their challenge to the European Commission, which has repeatedly warned Italy to rein in spending and cut its budget deficit. The government has also clashed with Europe over immigration and integration policy.

But cracks in the veneer have appeared since then, and differences of opinion, politics and ideology – and even budget now – between parties and leaders appear to be becoming more day-to-day.

Meanwhile, the two-party insistence that all is well on the coalition side has all but disappeared and particularly in the run-up to this week’s European Parliament elections in which the two parties are rivals.

Frayed tempers between the two sides prompted Prime Minister Giuseppe Conte, who was appointed by Di Maio and Salvini, to cancel a ministerial meeting scheduled for Monday.

With some optimism, Conte insisted that after May 27 (when the European parliamentary elections are over), the atmosphere will be “completely different”. That might be wishful thinking given the growing animosity between Lega and M5S leaders, Salvini de la Lega and Prime Minister Conte, and government ministers and officials.

CNBC examines five current sources of tension between the Lega and the 5 Star Movement:

1) Immigration

Immigration control has always been at the heart of Lega policies and the party wasted no time in implementing sweeping anti-immigration laws once in government.

Informally named after Interior Minister Salvini, the “Salvini Decree” (also known as the “Security Decree”) tightened immigration and citizenship laws and essentially limited the rights of asylum seekers. Critics say the measures punish the vulnerable, but conservative lawmakers insist they are needed to help Italy which is struggling to cope with an influx of migrants, largely from Africa. The M5S was more ambivalent about the measures and had tried to modify the decree.

Salvini, who has also closed Italian ports to NGO-run search and rescue vessels ferrying rescued migrants to the Mediterranean, expressed fury over the weekend when a German NGO vessel defied an order to do not enter Italian waters. He has also opened a new front of tension with coalition partner M5S and Prime Minister Conte who he says have been too soft on migrant rescue boats.

On Friday, Salvini reportedly said that “the prime minister (Conte) and the 5-star minister (M5S) (Di Maio) do not intervene, human traffickers will no longer go to Italy”. Di Maio responded by saying Italy had seen strongman leaders before “and we certainly don’t miss them”, ANSA news agency reported. Di Maio also accused Salvini of arrogance.

2) Expenses

Last year, Salvini and Di Maio seemed united enough to have big spending plans for Italy, much to the dismay of Brussels. While the Lega wanted to lower corporate taxes and introduce a “flat tax” rate, the M5S promised voters a universal basic income. Now the government is struggling to keep its campaign spending promises while stabilizing the country’s fragile finances and economy.

The European Commission has threatened to punish Italy (which has the second-highest debt in the eurozone after Greece) if it exceeds budget deficit targets and rules. After appearing to try to appease the commission, Lega again appears optimistic about the rule violation, suggesting it could reverse a planned sales tax increase and could simply increase government borrowing.

Deputy Prime Minister and Labor Minister Luigi di Maio(L), Italian Prime Minister Giuseppe Conte(2L), Italian Deputy Prime Minister and Interior Minister Matteo Salvini(2R) and Italian Minister of Economy and Finance Giovanni Tria(R) hold a press conference on the Italian budget on October 15, 2018 in Rome, Italy.

Antonio Masiello | Getty Images News | Getty Images

This put Economy Minister Giovanni Tria (who is not allied with either of the two ruling parties) in a difficult position. On Monday, Tria said it was “impossible” to meet deficit and debt reduction commitments while cutting taxes and increasing spending. “The government will have to choose,” Tria said, Reuters reported.

Meanwhile, Salvini said on Monday that the only way to reduce debt was to cut taxes to boost growth and that EU fiscal rules should be overhauled because they are hampering growth. The comments, reported by Reuters, come after Salvini said last week that Italy should exceed the EU’s 3% deficit limit if needed to stimulate the economy and create jobs.

But last Friday, Di Maio poured cold water on any M5S support for the plan, saying the movement would not support a budget law that would drive up Italy’s big public debt even further.

3) Family

Another bone of contention is social assistance. M5S’s Luigi Di Maio, who is also labor minister, wants to implement a so-called “family decree” that would give low-income families an allowance to help raise their children. Di Maio is also proposing to cut child care fees and discounts on nappies, but he clashed with Lega’s family minister Lorenzo Fontana over the plan; Lega wants to block the decree.

On Friday, Di Maio said the government’s future was tied to the family decree, saying, “‘We can divide on everything in this government, but not on the family,’ he said, adding that “The fate and survival of the government are at stake with this decree.”

4) Bribery

While Lega’s pet peeve is immigration, The M5S has made anti-corruption and corruption measures a key policy area. So when a corruption investigation was recently launched against Salvini’s economic adviser Armando Siri, Lega didn’t take the decision well.

Di Maio has repeatedly called on Siri, who denies any wrongdoing, to quit his post as undersecretary at the transport ministry (headed by an M5S member), but Salvini backed his adviser and insisted that he keep his position until the end of the investigation.

This was reversed when Prime Minister Conte sacked the deputy minister earlier in May, causing further friction with Salvini de Lega.

5) Education

Another spat between Lega and M5S erupted last Friday, but this time it involved a teacher who was temporarily suspended from her job because her students compared the security decree and migrants from the leader of the Lega Salvini to the racial laws of Benito Mussolini.

Salvini called the comparison “disrespectful” while M5S said the suspension – which was ordered by Education Minister Marco Bussetti (a Lega member) – amounted to censorship.