Why Stratfor is wrong on its Italian election analysis

Stratfor recently published a piece covering the imminent Italian elections and presenting its conclusions on the topic.¹⁾Europe braces for the next Italian election, Stratfor 2018-01-23. The article, however, wrongfully presents a number of issues, which may lead prospective investors astray.

In the first paragraph introducing the populist candidates and parties running for the Italian parliament, the author, an alleged expert according to his own profile on anti-establishment movements states: “The right-wing Northern League, for example, has (…) proposed a referendum on Italy’s membership in the eurozone”. This isn’t true. The Northern League wants to leave the euro without going through the referendum because it thinks Italy would get battered during the political campaign over it. It was just a month ago when the party’s candidate for the position of Prime Minister, Matteo Salvini, called the referendum idea stupid.²⁾Euro, Salvini: referendum è una sciocchezza ma non ha senso restare, Il giornale 2017-12-20.It is not the Northern League but the other “populist” movement, Movimento 5 Stelle, which opts for a referendum.

While this item of misinformation might be regarded as a piece of shoddy journalism, the other claim, namely that “none of the parties flirting with the idea of leaving the eurozone has presented a concrete plan to do so” comes very close to being a lie.

We previously covered the parallel currency concepts³⁾Italy’s parallel currency: all you need to know, Gefira 2017-10-14. advocated in Italy. One of them, the minibot version developed by Professor Claudio Borghi Aquilini, is officially in the program of the center-right coalition signed by all the leaders of the parties involved just one week ago.⁴⁾Ecco il programma del centrodestra, dalla flat tax all’Europa fino alle energie rinnovabili, Formiche 2018-01-19.So, not only is there a concrete plan, but also, should the center-right coalition have the numbers for a parliamentary majority, its deputies would go ahead with it.

A few lines later we read: “The Five Star Movement, the Northern League and Forza Italia, in fact, have all back-pedalled on the issue in recent weeks.” This is not true either, though it’s an idea pushed by the Italian mainstream media, which at best hints that the establishment actually falls for its own lies. It is true that Luigi Di Maio, candidate of the 5 Star Movement, has flip-flopped on the idea: in December he said he’d vote to leave the eurozone in the hypothetical referendum on the common currency;⁵⁾Di Maio, se referendum voto uscire, Adkronos 2017-12-18. twenty days later he claimed that due to the changing relationship in the Franco-German axis, it might not be the time any longer to leave the euro.⁶⁾Di Maio: “Non è più il momento di uscire dall’euro”, Adkronos 2018-01-09. While Di Maio seems to be playing up to the media being in bed with French President Macron, long before the latter actually delivers on his promises, this can’t be said of the Northern League. On the same day that Stratfor published its analysis, Salvini presented an independent candidate for his party: Professor Alberto Bagnai, one of the most prominent critics of the Eurozone and an advocate for its dismantling. Not exactly a back-pedalling. A few considerations here are important: Salvini is ditching the “Northern” part of the party’s name as well as its original separatist ideology in favour of a nationalist one. Professor Bagnai, on the other hand, is notable for expressing his left-wing sympathies and has a large online following. The unwillingness of the Left to break with neoliberal policies, which, as Bagnai believes, the euro is a part of, compared to the willingness of Salvini to listen to his arguments, paved the way for this alliance. Ultimately, this follows the natural course that has already seen the Western working class giving up on the left leaning parties in favour of nationalist ones, due to the former’s betrayal of their interests via its support for open borders immigration policies.

In conclusion, how likely is Italy to leave the Eurozone during the next legislative mandate? For that to happen,a few conditions must be met:

– the center-right coalition needs to have a parliamentary majority to form a government (we estimate the probability of it at roughly 35%);

– the League needs to be the largest party of the coalition, receiving more votes than Berlusconi’s Forza Italia (a 45% probability, with polls tending to give Berlusconi a slight advantage, but the populist vote might be underestimated);

– Berlusconi needs to receive an unfavourable sentence in his ECHR lawsuit, which would force him to abandon the political scene for good. While he has recently reconciled with Juncker, the European People’s Party and the European establishment, we suspect this is largely due to self-interest, hoping for a favourable sentence allowing him to sit in the Italian parliament again and receive immunity from his many lawsuits (roughly 70%, though this will likely take months, if not years).

In the nearest future, it is rather improbable for all this to happen, but not impossible. Brexit and Trump’s election have already shown that the improbable happens.