More than two months after the general elections, Italy still has no government. The President’s veto of an anti-Euro nominee for finance minister has opened up a new political crisis that could lead to another general election this year.

It has been more than two months since the general elections were held on 4 March, and Italy still has no government. After numerous attempts to find a majority in parliament in the past weeks, the Five Star Movement and the Northern League parties seemed to have reached an agreement to form a government. The Movement and the League were able to develop a program with shared goals, nominating a politically-unknown law professor, Giuseppe Conte, as prime minister to avoid any conflicts for the leadership of the new government.

It looked like a done deal until May 27, when President of the Republic Sergio Mattarella, who has the institutional role to approve the new government and its ministers, put a veto on the nominee for finance minister, Paolo Savona. Savona, who was the industry minister in the Ciampi’s government in 1993-1994, has become close to both the Northern League and the Five Star Movement due to his anti-Euro position. Recently, Savona called for a plan B in the case Italy had to leave the Eurozone.

In the past, the Northern League and the Five Star Movement have heavily criticised the financial restrictions coming from the EU, and this aspect represents one of the points in common between the two parties. However, leaving the Eurozone was included neither in the Movement’s nor in the League’s political programs. Moreover, the agreement signed between the two parties to form government led by Conte did not talk about any plan for the Euro exit.

The response of the financial markets for the potential appointment of Savona did not take long to arrive. Since the agreement between the two parties was finalised, the spread reached over 200 points, worrying the investors and, as a consequence, the EU. As a result of the market reaction, the President of the Republic requested that Savona be replaced with another minister.  The Northern League and the Five Star Movement did not accept the recommendation, keeping Savona as the nominated finance minister and, because of this decision, President Mattarella rejected the proposed government, opening a new political crisis.

These events have raised numerous questions and concerns about the role of the financial markets in the domestic politics of the country and the appointment of the new government. It is understandable that the EU was not looking forward to dealing with a Eurosceptic government. Moreover, over the past weeks President Mattarella has never hidden his desire to have an EU-friendly government in power. Ultimately, Mattarella used his power as President of the Republic to veto Savona, considering an anti-Euro finance minister a threat for the stability of the country. As he stated, the electorate did not vote to leave the Eurozone because this was never part of the electoral campaigns of the parties that hold the majority in parliament.

However, Mattarella’s decision was strongly criticised by Salvini and Di Maio, who labelled it as an anti-democratic act. The Northern League and the Five Star Movement received the highest number of votes in the elections in March 2018. The Five Star Movement gained more than 32 per cent of votes while the Northern League obtained almost 18 per cent of votes, leading the centre-right coalition. The two parties together reached 50 per cent holding for a majority in parliament. Because of the rejection of the proposed government, Di Maio and Salvini have called for Mattarella to be impeached for betraying the State and for not respecting the electoral will.

While the debate about Mattarella’s decision continues, the President has now appointed Carlo Cottarelli, a former director of the International Monetary Fund, to create a technocrat government that will guide the country into new elections, probably after the Italian summer. The neutral government has yet to find the support of the majority in parliament. It would be the first time Italy has held two general elections in the same year.

Even though Mattarella’s veto represents a very upsetting decision for both the Five Star Movement and the Northern League, this decision could potentially benefit both in the upcoming elections. They will most likely run a vicious anti-establishment political campaign. If they decide to work together to form a new government after the next elections, they could easily obtain a majority in parliament as demonstrated in the simulation run by the Istituto Cattaneo only a few days ago.

However, new general elections will also pose questions about the future of the existing party coalitions and the reaction of the electorate. Since April this year, four-time former Prime Minister Silvio Berlusconi is back in the game and can run for a seat in parliament. He could attract new votes for the centre-right coalition, mitigating the right-wing agenda of the Northern League. The question is whether Salvini will be interested in being part of the centre-right coalition with the risk of being overshadowed by Berlusconi.

At the same time, the Five Star Movement could also pay a high price after signing the agreement with the Northern League. While a large majority of those who voted for the Movement used to vote for the centre-left Democratic Party, the leadership of the Movement has demonstrated common ground with the populist right-wing Northern League. Will the agreement with the Northern League backfire against the Five Star Movement in new polls? It is too soon to tell, especially if the political campaign focuses on the anti-democratic behaviour of the President of the Republic.

In the meantime, the centre-left Democratic Party and former prime minister Matteo Renzi are yet to comment on this Italian drama. The party is still resolving internal problems, including the issue of the leadership. New elections will put more pressure on a party that is still recovering after the disastrous result in the constitutional referendum in 2016 that forced Renzi to resign as prime minister.

With a very weak centre-left party, the controversial figure of Berlusconi back in the electoral arena, an upset population due to the recent political events and the lack of support from the EU in the migration crisis, populist and anti-establishment parties could not ask for a better scenario to start a new electoral campaign and with the aim of winning the next elections.

Dr Chiara De Lazzari holds a PhD in Politics from Swinburne University. She is a member of the executive committee of the Contemporary European Studies Association of Australia and currently works as Lecturer and Course Coordinator at Navitas College.

This article is published under a Creative Commons Licence and can be republished with attribution.