Giorgia Meloni has proven the skeptics wrong

The Prime Minister of Italy, Giorgia Meloni (DPA)
The Prime Minister of Italy, Giorgia Meloni (DPA)

At the beginning of a year in which he will face his first real test of popular opinion in the elections to European Parliament of June, Giorgia Meloni He hopes that the growth figures that will be published next week will give him some encouragement. It is unlikely that she will succeed. The latest estimate showed the economy had grown just 0.1% in the 12 months since Italy’s far-right prime minister took office in October 2022. Nicola Nobileof Oxford Economicsstates that quarter-on-quarter growth in the last three months of 2023 could even have been negative.

So far no blame has been placed on the management of Melons. Nor should it. The rebound in the economy, greatly affected by the pandemic, was destined to run out, and has faced new headwinds, especially due to the energy crisis caused by the Russian invasion of Ukraine. But the lack of growth is one of two dark clouds in an otherwise fairly clear sky. The second is the increase in irregular immigration, which the right-wing coalition of Melons wants to stop. The number of arrivals from Mediterranean amounted to 157,652 last year, a 50% increase over 2022 and the highest figure since the peak year of 2016. The Government hopes to divert some vessels to holding centers in Albania. But the plan has run into a legal challenge there that has not yet been resolved.

Otherwise, Melons control the situation more and more”, he states Lorenzo Castellaniteacher of Politics at Luiss University of Rome. His coalition has a comfortable majority and remains united, despite the disputes. The latest polls give the prime minister’s party, Brothers of Italy (FDI), almost 29%, compared to only 9% of the Northern Leagueleadered by Matteo Salviniand 7% of Forza Italiadevoid of its founder, Silvio Berlusconi, died last June. The efforts of Salvini to recover the support lost by the Siblings with an increasingly tough stance have not given better results to the Liga. The opposition is divided between Democratic party (PD), center-left, and the Five Star Movement, smaller and populist. Surveys suggest that Elly Schleinof the PD, is the least popular of the leaders of the main Italian parties.

Relations with allies Italia in the I’LL TAKE They are good. Italia has supported with enthusiasm, and weapons, Ukraineand more discreetly to Israel. It has also maintained Brussels happy enough for the European Comission continue to provide regular Italia a part of the 194,000 million euros (211,000 million dollars) of the EU Recovery Fund (Covid-19), by far the largest amount allocated to any Member State. But it is one thing to deposit money and another to spend it. Concern is growing about the ability of Italia to disburse the funds. An investigation of openpolicea Roman NGO that promotes transparency, shows that only 2.5 billion euros were actually spent in 2023.

The expected stimulus to the economy when the money reaches its destination is one of the main reasons why Italian debt has not been sold, despite rising interest rates and a deficit that has skyrocketed since 2019. Another is that he European Central Bank (ECB) made it clear in June 2022 that it would not tolerate a much larger differential between Italian and European interest rates. Germany, the block reference. But the ECB, like the Commission, expects continued structural reforms in return for its support. It is not at all clear that the government of Melons be willing to do them.

One of the biggest obstacles to business activity – and to foreign direct investment – is the delay that companies encounter in resolving disputes and collecting debts. Marta CartabiaMinister of Justice in the previous government of Mario Draghi, introduced procedural changes and a digitalization program, and hired about 8,500 junior lawyers as court clerks. The time it takes to resolve a civil case has been reduced by almost 20%. Delays have been reduced by more than a third.

The current Government has adhered to those changes, but its own contribution to streamlining not only the courts, but also the use of the generosity of the UE, is controversial. A bill presented to Parliament would abolish the crime of abuse of power. One of its objectives is laudable: ending the reluctance of officials to sign projects for fear of inadvertently falling into illegality, for example, awarding a contract to a company that later turns out to be a mafia front. But in a country permeated by the influence of organized crime, the bill has sparked protests from lawyers and NGOs. It has also attracted criticism from Brussels.

Liberalization of the economy is also problematic. It’s nothing new. All Italian conservative governments of the last 30 years have resisted challenging vested interests that would be harmed by deregulation. The League, in particular, has fought tooth and nail to protect small, often family-owned Italian businesses from competition. But in the case of the Government of Melonsthere is a new element: his own party is inspired by a protectionist, corporatist, statist economic philosophy and criticism of the free market.

Ministers have repeatedly intervened, or attempted to intervene, in the functioning of markets. They have tried to limit price increases on some air routes and apply an extraordinary tax to banks’ extraordinary profits due to inflation. They also plan to skew corporate governance in ways that diminish the influence of foreign direct investors. Privatization is not planned, although Melons He insisted on January 22 that the Treasury could raise €20 billion over three years through partial privatizations that would not jeopardize state control. Nor has there been any serious movement towards realizing the State’s vast real estate assets. All of this raises the question of how the Government, which approved an expansive budget for 2024, intends to reduce – or at least contain – its gross debt, which is around 140% of GDP. This week, the OECD warned that Italy would have to cut spending, raise taxes, or both.

Of all the European countries, Italia is, for once, one of the least worrying. But the biggest challenges for his government lie in the future. He has to find a way stop unauthorized immigration if he wants to appease his voters, and spend the recovery money faster if he wants to appease Brussels. But above all, it needs a growth strategy that is not limited to injecting EU money into the economy. “If we cannot raise the growth rate,” he warns Francesco Giavazziwho was economic advisor to DraghiWe will have problems”.

© 2024, The Economist Newspaper Limited. All rights reserved.



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