Can Italy’s centre-right coalition recover from far-right influence?

The EU recovery package is now being translated into national plans—and, as Italy shows, the implications are not just economic.

By the end of April, European Union member states seeking funds from the European recovery programme, Next Generation EU, had to submit proposals to the European Commission. Among them was Italy’s Piano Nazionale di Ripresa e Resilienza (PNRR), a comprehensive plan costing some €222 billion. Its success or failure could be key to the future of Italy’s governing coalition and Italian politics tout court.

Along with the EU’s long-term budget, the Multiannual Financial Framework 2021-27, Next Generation EU, a €750 billion stimulus fund, comprises an overall recovery package of €1.8 trillion, labelled by the commission the largest ever (Table 1). Designed to boost the post-pandemic recovery, its aim is to rebuild ‘a greener, more digital and more resilient Europe’. 

Of the €750 billion available from Next Generation EU, €312.5 billion will be non-repayable grants financed by joint borrowing, €360 billions will consist of loans and the remaining €78 billion will be provided through other funding programmes. Italy and Spain will get the biggest share of this ‘new Marshall Plan’, €204.5 billion and €140 billion respectively, with France ‘only’ allocated €40 billion.

Table 1: Multiannual Financial Framework 2021-27 and Next Generation EU expenditures (€bn)

High expectations

After months of controversial debates, uncertainties and political crises—including the demise in February of the government led by Giuseppe Conte—Italy officially presented its PNRR, mostly focused on Next Generation EU. To the funds provided at EU level have been added some €30 billion from a budgetary ‘fiscal deviation’, defined by the new prime minister and former European Central Bank president, Mario Draghi, as debito buono (‘good debt’).

For the PNRR there are high expectations: roughly 27 per cent of the resources of the plan will be devoted to Italy’s digital agenda, 40 per cent to investments to counteract climate change and 10 per cent to social cohesion. Particular attention has been paid to investments in the historically-disadvantaged Mezzogiorno of southern Italy (€82 billion, of which 36 in infrastructures) and important projects will involve young people and women—groups hit hard by the socio-economic impact of the pandemic.

A task force composed, among others, of 29 ‘commissari straordinari’ will oversee the development of 57 key infrastructures for the country (at a cost of €83 billion), including railways, ports and highways (Table 2). The leadership of Italy’s centre-right coalition will be dramatically affected by the fortunes of this complex and ambitious plan.

Table 2: costs of critical infrastructures identified in the PNRR and share of investment for southern Italy

Unexpected decision

In February all political parties represented in the Italian parliament supported Draghi’s appointment, except one—the far-right Fratelli d’Italia (Brothers of Italy). The support of Forza Italia, creature of the former prime minister Silvio Berlusconi, was not a big surprise. But the decision by Matteo Salvini, an anti-immigration and often Eurosceptic radical-right populist, to commit his Lega to back the former ECB technocrat, was unexpected.

Salvini claimed he would ‘rather prefer to play the game and manage 209 billions of euros than not’. Yet in Budapest he recently met the prime ministers of Hungary and Poland, Viktor Orbán and Mateusz Morawiecki respectively. In November 2020, they had jeopardised the complex intergovernmental dynamics behind agreement on Next Generation EU—concerned that the rule-of-law mechanism attached to the stimulus would make it easier for Brussels to sanction violations of democratic principles.

With the decision to support Draghi’s executive, Salvini has opted to tie electoral support for the Lega to the long-term success of the PNRR. By contrast, the leader of Fratelli d’Italia, Giorgia Meloni, is betting on its failure and on the incapacity of the Draghi government to resolve the pandemic, alongside the economic situation, anytime soon.

The Lega is now polling at around 22 per cent, with Fratelli d’Italia following at around 17.5 per cent (respectively 8 per cent down and 4.5 per cent up since the beginning of the pandemic). So the chances are high that the fate of the PNRR may decide the leadership of the centre-right administration.

Indeed, according to the latest polls, Forza Italia now represents only its third party, with 7.6 per cent (see table 3). Since Italy’s last general election (May 2018), the balance of forces has thus been gradually moving in the direction of a fully-fledged right-wing coalition.

Table 3: support for political parties of the centre-right coalition in Italy (%)