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29 May 2018updated 24 Jun 2021 12:21pm

Italy could be heading for a euro exit that’s more destabilising than Brexit

With Cottarelli unlikely to name a government capable of commanding parliamentary approval, Italy may head to a fresh set of political elections.

By Stephen Bush

Italy has been thrown into political crisis after a stand-off between the president, Sergio Mattarella, and the leaders of the Five Star Movement and Lega Nord over their pick for finance minister, Paolo Savona.

Mattarella refused to accept Savona’s nomination on the grounds that the 81-year-old former minister has never retreated from his belief that an exit from the euro must be done by stealth, and Five Star/Lega Nord both refused to name another candidate. As a result, Mattarella refused to allow the parties to form a government, and has named Carlo Cottarelli as interim prime minister. Cottarelli is absolutely certain to fail to name a government capable of commanding parliamentary approval and Italy will head to a fresh set of political elections.

For understandable political reasons, both the Five Star Movement and Lega Nord are talking of a coup promulgated by Eurozone officials, bankers and a corrupt president. For less understandable reasons, many pro-Brexit commentators, on both the left and right, here in the United Kingdom are joining in.

The truth is that Mattarella was acting well within his constitutional role as president, and that neither the Five Stars nor Lega Nord can credibly claim that they have a mandate to take Italy out of the euro from the last election. But Mattarella may have been stuffed either way: he couldn’t accept Savona but in rejecting him he has handed a PR coup to Lega Nord. (It may be that the nomination of Savona was a poison pill by Lega Nord’s leader, Matteo Salvini, whose party has risen in the polls since the election, to force an election re-run in order to strengthen his own hand.)

The gamble that Salvini is making is that an election in which Lega Nord have to make an explicit argument against the euro goes better for them than one in which they cloaked their Euroscepticism and talked instead about the need to clamp down on immigration and to reform the EU’s institutions. The gamble that Mattarella is making is that voters won’t provide Lega Nord and Five Star the mandate for euro exit they didn’t get last time. There is a very real possibility that Italy and the EU are heading for an exit that is several orders of magnitude more destabilising, more complicated and more fraught than Brexit ever could be.

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According to the first poll since the stand-off began, voters are split: 35 per cent believe Mattarella was incorrect to have refused to accept Savona as finance minister, with 26 per cent believing he was right to do so, and 24 per cent saying that Mattarella was correct from a constitutional perspective but that in the circumstances he ought to have accepted Savona’s nomination.

But the next Italian election is, at the least, months away, so who knows what twists and turns will come next. The one prediction you can safely ignore is anyone claiming that these events will radically shift the parameters of the Brexit deal: the next Italian election won’t be until September at the earliest, by which point the withdrawal agreement will be entering its final stages in any case.