He has become his country's most important politician since the election. At the same time, he has become Europe's most-feared bogeyman. Now, he is seeking to become a statesman.
Matteo Salvini, 45, the leader of the Italian right-wing nationalist party Lega, has been promising for years that he would lead Italy out of the eurozone if he ever got the chance -- and it initially appeared that he would be unable to form a government because of his insistence on appointing a finance minister who advocated leaving the common currency zone. But now, Salvini is doing all he can to demonstrate that he doesn't actually have anything against the euro after all.
On Wednesday, a painting crew drove up to Lega headquarters on Via Bellerio in Milan. For years, the words "Basta Euro" had been emblazoned on the wall in massive letters. End the euro. But this week, that message was literally whitewashed, as if the words had never existed.
"Basta Euro"? Did someone actually make such a demand? Surely not Salvini, who once said about the euro: "We don't need a referendum. If Lega enters the government, we're out."
Even as the painters were still at work, Salvini's supporters were celebrating at Milan's central station - popping the corks of bottles of prosecco and dreaming of winning 30 percent of the vote in the snap elections that briefly seemed inevitable. The crisis in Italy is visible, they say, and you can even see it in the train station. "All the unemployed and clandestini," they say, citing the term used to describe illegal sub-Saharan Africans they claim loiter about day in and day out, "groping our women and disturbing the cityscape" - it all needs to be stopped.
Salvini has played a masterful game since the March 4 election. Although the Five Star Movement (M5S) technically got the most votes, it is Salvini who has emerged as the clear winner during the 90 days it has taken to form a new government. His party has risen by 10 points in the polls to 27.5 percent and he dropped his original coalition partner, Silvio Berlusconi's Forza Italia, in favor of an alliance with M5S.
A Fan of Putin and Euro Foe
It paid off. After several crazy weeks and a significant amount of back-and-forth, Salvini has prevailed as the undisputed leader of the right-wing camp, perhaps even the most powerful man in Italy. Salvini, a fan of Vladimir Putin and foe of the euro, an anti-migrant politician and a defender of Mussolini -- and a man who also likes to lash out at Germany from time to time.
He played his game of high-stakes poker with virtuosity, posing as a victim of the Italian president (who must formally approve his government) and of the establishment, threatening new elections and ultimately entering into a coalition with the Five Star Movement.
Now Paolo Savona, the common currency opponent President Mattarella rejected as finance and economics minister, has been installed as minister for European Affairs. Salvini has taken over the Interior Ministry, his coalition partner Di Maio the Labor and Development Ministry. And lawyer and university professor Giuseppe Conte is prime minister.
Quite a few commentators believe that Salvini deliberately provoked this week's crisis. If new elections were to be held in the coming months, which is not unlikely given this imbalanced coalition, then he would probably win. For opponents of the populists, all that remains is the hope that the new government will prove chaotic and that people will quickly grow disenchanted with it.
Italy no longer has a strong liberal, moderate or left-wing opposition: The traditional parties and the well-known centrist politicians have mostly lost their credibility. The picture of Italy at the moment is indeed a tragic one, standing as it does for the failure of politics, but also for the longer term consequences of efforts to save the euro, which have strengthened extremists well beyond Italy's borders.
Will these two populist parties, as dissimilar as they are, really now strive to leave the eurozone or even the EU, or are their most recent denials to be believed? And what happens if they honor their pledge to spend billions on social benefits and simply ignore the EU Stability Pact and its restrictions on deficit spending?
The stakes could harldy be higher. Not only is the future of the eurozone's third-largest economy suddenly uncertain, but the euro's very survival could be at risk. The euro crisis has been contained for several years now, but it could return very soon -- and much larger. Last time, it was "just" Greece.
Europe's Horror Scenario
If Salvini and Di Maio drive up Italy's sovereign debt load -- already far in excess of 2 trillion euros -- as they have indicated they will, a dynamic will be put into motion that would be difficult to stop. The European Central Bank would no longer be allowed to keep buying up Italy's sovereign bonds, interest rates on those bonds would skyrocket and the country could face bankruptcy. And given Italy's size, a bailout is a virtual impossibility.
This is the horror scenario Europe has feared for years. And it could materialize extremely quickly. The first warning signs are already visible. The spread, or interest rate gap between 10-year Italian and German government bonds, has already almost tripled, and the Milan stock exchange has recorded billions in losses.
Still, the markets remained relatively calm on the news that a governing coalition had been forged. Investors, it seems, would rather see a populist government than snap elections. And it's very possible that it will be some time before the first major altercation between Rome and Brussels, perhaps around the time that negotiations get serious over the next Italian budget. Some may also be reassured by the fact that three important members of the new cabinet are essentially technocrats rather than members of the two parties.
Leading that list is Conte, who was sworn in on Friday along with his cabinet, but also incoming Foreign Minister Enzo Moavero Milanesi, who served as a member of Mario Monti's technocrat government. And then there's Giovanni Tria, the economics professor chosen as finance minister. He isn't in favor of leaving the euros, but he has, in the past, called for Germany to leave the common currency because its trade surplus is incompatible with the eurozone. He also advocates public financing through the European Central Bank, a practiced banned under EU treaties. He certainly can't be described as a moderate.
Europe's banks have already begun suffering from the chaos in Rome because they have to offer buyers higher interest rates when selling their own bonds. German financial institutions are also anxiously eyeing developments with their $91 billion in outstanding debts that are held in Italy. With $311 billion in outstanding debts in Italy, only French banks have greater exposure in the event of defaults.
But the situation is most threatening for Italy itself. Commercial banks, the central bank and government and retail investors are more closely interconnected in the country than elsewhere. Some 48 percent of all government bonds, well over 1 trillion euros, are held by Italian banks, insurers and small savers. A further 20 percent are parked at Banca d'Italia.
Those are just the economic challenges, and they are bad enough. Europe is currently battling on many fronts, both internally and externally. The EU must adopt a united stance on Donald Trump, whose misguided policies threaten both Europe's security and prosperity. Trump is forcing Europe into a trade war and, worse yet, he threatens to scrap the postwar international order that enabled the Europeans to find their place in the world -- through trade and the structures of the World Trade Organization and the security it found in the form of NATO.
But how can the EU wage a trade war if Italy threatens to spiral into chaos? At a time when the EU could be proving itself as an alternative to Trump's unilateralism, when Japan, Mexico and the members of South America's Mercosur are lining up to conclude free trade agreements with Brussels, Europe may instead be facing months, if not years, of squabbling over a possible bailout for Italy. And then, almost as an afterthought, there's Brexit, Britain's departure from the EU, which is set to take place in nine months.
The attention instead is on Italy, a founding member of the EU, a pillar of NATO and the third-largest economy in the eurozone. If this country teeters, it will shake the entire architecture of the European Union.
A Window of Opportunity Closes
The fact that the EU never had the strength to undertake fundamental reforms of the economic and currency union after it barely managed to keep Greece in the eurozone has now come back to haunt it. And that's not even to mention the fact that Chancellor Angela Merkel has never offered a proper response to the ideas for European reform forwarded by French President Emmanuel Macron.
The window of opportunity for tackling those reforms had always been narrow. In light of the crisis in Italy, however, it now appears to be closing. Even optimists expect little more than minimal consensus at the important EU summit at the end of June. The fear of Italy's collapse will now make it that much harder for Merkel to reach out to Macron. After all, it seems unlikely that German conservatives would agree to a new crisis fund of the kind Macron is demanding at the same time as a real crisis is developing. The EU wanted to kick into reform gear together with Macron, but now Italy is pulling the community back into the maelstrom of crisis.
This applies not only to eurozone reforms, but to almost all major political projects. The desired deal on asylum law, e.g., the decision of whether and under what conditions EU member states can be required to take in migrants, is once again uncertain, even though it would be in Italy's best interest as one of the country's most affected by the refugee crisis.
The Italy crisis is a convergence of the two greatest challenges facing the EU: the economic threat to the eurozone and the erosion of shared values and norms. If the populists now govern in Italy, the country could steer itself on a course of constant confrontation with Brussels -- by for example, expressing its solidarity on key issues with right-wing populists in France, Austria or Finland or with the EU-critical governments in Hungary and Poland.
Or it could take the side of half or full-on autocrats like Donald Trump and Vladimir Putin and undermine European unity in the process. Some potential issues where it could do so include the Iran agreement, the trade tariffs imposed by Trump, the extension of sanctions against Russia, climate policy or even the European approach to China.
Bad News for the Continent
The revival of nationalism in Europe, particularly in Italy, is bad news for the Continent. If the EU ever had one great, overarching goal, then it was to counter national self-interest with the vision of a transnational community of values. What will hold Europe together if that foundation is shaken?
And all this comes at a time when Trump and Putin are trying to tear down the multilateral order, established over many years through painstaking work, and instead insist on the survival of the fittest. By withdrawing from international treaties, violating international law, launching trade wars, waging real wars and annexing parts of neighboring countries. A world, in other words, in which the EU ought to serve as a bulwark, as a bastion of reason. But that's not a role the EU will be able to play if men like Salvini set the tone in the future.
But to truly understand the roots of the Italian crisis and the reasons for populist success in the country, you have to look beyond Rome -- all the way to Sicily, the poorhouse of Italy.
'Pressure from Europe'
Sitting in a smalltown south of Etna on an early summer day, Teresa Lauria, 32, voices her anger about how Italian President Mattarella at first tried to keep her party, the Five Star Movement, out of government. Lauria says there were other forces at work, "pressure from Europe and also from Germany."
Lauria has been active with the Five Star Movement since 2012. Her father was a communist, "like practically all workers in the city," she explains. Lauria herself is running for mayor in Priolo Gargallo, where the election is scheduled to take place on June 10. Some 72 percent of voters here cast their ballots for M5S in the national election in March, the party's strongest showing anywhere in the country. "There was mass euphoria," says Lauria.
The article you are reading originally appeared in German in issue 23/2018 (June 2nd, 2018) of DER SPIEGEL.
Priolo Gargallo is located in the middle of a huge industrial area, where the chimneys of the factories tower at the ends of the streets. Local petrochemical plants and steelworks once employed 30,000 people. Today, not even half that many people have work. The area around Priolo Gargallo has been dubbed the "triangle of death" because of the toxins in the air, water and soil here.
A few years ago, the city government set up a kiosk in the city center, the "House of Water," so that all residents would at least have access to clean drinking water free of charge. Every resident has the right to fill up on filtered water there. Antonello Rizza, who had been mayor for years, proudly named the facility after himself.
But Rizza is longer able to visit it, as he's currently being held under house arrest. A few months ago, he was driven out of office for corruption and other allegations. But those aren't Sicily's only problem -- it also has persistently high unemployment. The rate for Mezzogiorno, as southern Italy is called, is 19 percent compared to a national average of 11 percent. More than half of the young people in the south are jobless. Many who have gone to college leave to find better conditions and pay elsewhere. The average per capita economic output in the south is 18,600 euros, a little more than half the northern Italian average of 34,000 euros.
Lauria doesn't naively believe that the Five Star Movement can suddenly pull an economic miracle out of its hat. "But people trust us to be honest and do something to ensure a better future," she says. "With our idea of a modified flat tax, we could provide enduring economic stimulus in the south."
She believes Europe's influence on Italy is "far too great," that her country is being overly patronized and that other Europeans lack solidarity for Italy. Lauria cites the refugees who come via the Mediterranean Sea as an example. "Many countries have built walls to protect themselves, but they do nothing for us." She says she used to always imagine the EU as being like a "big family, but it isn't." In short: "The others are playing a game and Italy is not a part of it."
Lauria's campaign relies on direct contact with voters. On a recent Tuesday evening, she drove the city in a Fiat Panda that she has converted into her campaign vehicle. She stopped repeatedly to talk to passersby and to explain the policies she would pursue as mayor. "We don't want to be a people of freeloaders!" is one of her most popular messages. "We're not the freeloaders, the freeloaders are the politicians who take money from the people but give nothing back."
But Italy, and this is the real paradox, isn't just Priolo Gargallo with its polluted water. It's also Milan, the country's shadow capital, the city of bankers, haute couture and the upper middle class, with their upscale shops and their expensive taste in clothing. Italy is a divided country, where the south can sometimes feel like North Africa and the north is one of Europe's richest regions.
Indeed, the total financial assets held by Italians recently resumed growth and now stands at 4.3 trillion euros, with average household assets exceeding those in Germany. And yet, Italians feel as though they are poorer.
The problems facing Italians have less to do with the euro and more to do with the challenges of servicing the debts racked up in the 1980s, a total sovereign debt load that now stands at 2.386 trillion euros. The price for their predecessors' profligacy is now being paid by the country's younger generations, many of whom can't even afford to rent their own apartment and are forced to make due with low-paying, part-time jobs despite having advanced degrees.
The drastic austerity measures imposed in the last several years have primarily left their mark on the country's educational and health care systems. Since 2009, public investment in Italy has plunged by a third.
As such, it is no surprise that populists like Di Maio and Salvini now have the say in Rome, largely on the strength of promises to give more money back to voters. They also attracted support with a simple and convincing promise: to stop doing things as they have always been done.
A Complete Loss of Faith
There was, after all, a leader in the country's recent history who had promised to clean things up in Italy: the Social Democrat Matteo Renzi. He was smart, audacious and determined to fight the symptoms of the Italian sickness: corruption, cronyism, out-of-control bureaucracy and the gerontocracy. It was as though the window had been thrown open in a stuffy room. The Italians took a deep breath and then rewarded Renzi in the 2014 European elections with more than 40 percent of the vote for his party. But it was all downhill from there.
Instead of seeking to win over his internal party critics, who were still relatively moderate at the time, Renzi sought to humiliate them. He also took full credit for the fragile indications of an economic turnaround, even though ECB policies and a strong euro were a significant contributing factor. And while he was right to seek a constitutional amendment to make Italy leaner, more decisive and easier to govern, he took the calamitous step of threatening to resign if Italians voted against the new election law in the nationwide referendum.
Surrounded as he was by his mostly Tuscan court, Renzi lost sight of just how tired Italians -- already exhausted by the endless crisis -- had become of his endless self-adulation. The reforms he introduced did bear some fruit, but only very slowly. And the result was a catastrophic result in the referendum, with 59 percent of voters rejecting the constitutional amendment.
Renzi's rapid collapse, from more than 40 percent of the votes in 2014 to just 19 percent in 2018, is unparalleled in postwar Italy. It wasn't just a personal affront for Renzi, it also showed that Italians had completely lost faith in their politicians.
And because aging figures from the past continued to occupy the country's political stage, including former prime ministers like Romano Prodi, Massimo D'Alema and Pierluigi Bersani, the desire for new blood was significant.
It was one of those newcomers, Silvio Berlusconi, who paved the way for today's populists. "From the 1990s onward, he anticipated much of what we are now increasingly seeing in politics: a simple language, the preference for political novices over career politicians and the praise for the simple man as a welcome contrast to the elite," says Giovanni Orsina, a political science professor at Rome's LUISS University.
Berlusconi himself, whose ban on holding political office -- imposed due to his tax evasion conviction -- was recently lifted by an Italian court, can once again get involved. But Forza Italia, the party that launched the 81-year-old to four terms as prime minister, has now plunged to just 8 percent in the polls. Within 10 years, the Berlusconi camp has lost more than 4.6 million voters. The Social Democrats, meanwhile, lost more than 6 million in the same time period.
Wind in the Sails of Populists
Across Europe, EU opponents are now seeing the situation in Italy as affirmation of their skepticism. In Germany, the right-wing populist Alternative for Germany (AfD) joined in the applause for the new populist government in Italy. AfD party head Jörg Meuthen told DER SPIEGEL that the coalition pairing the Five Star Movement and right-wing Lega is "extremely gratifying." The fact that the two parties are in favor of something that AfD is vehemently opposed to -- namely taking on debt for which Germany and other EU member states are indirectly liable -- changes nothing in Meuthen's assessment. The main thing is that they are critical of the EU.
The victory of the Italian populists has also put wind in the sails of Marine Le Pen, head of the French right-wing populist party Front National. Since losing the presidential election to Emmanuel Macron, Le Pen's party has been struggling. But the Italian coalition has solidified her conviction that the French president is merely "an anomaly" in a world that is becoming increasingly nationalist and anti-EU.
The article you are reading originally appeared in German in issue 23/2018 (June 2nd, 2018) of DER SPIEGEL.
Mattarella's refusal to accept Salvini's selection of Paolo Savona to head the Finance Ministry provided a perfect opening for Le Pen. "The EU and the financial markets are once again confiscating democracy," she wrote on Twitter. "What is happening in Italy is a coup. The Italian people are being robbed of their decision by illegitimate institutions." She then threw in an ominous warning: Ignoring the desires of the voters will have consequences, she said, and the anger of the people of Europe will grow.
Hatred of Brussels and Berlin, combined with the belief that the common currency and its dominance by the Germans is the root of all evil, is the glue that holds all European populists together, whether from the right or the left. It is also what is holding the Five Star Movement and Lega together.
Mattarella's veto was only due to a single ministerial appointment and not because of the government as a whole, but it has fueled distrust of democracy in Italy and has played into the hands of the populists. Once again, there is a conflict between one nation's democracy and the common European currency -- a friction that had already become apparent in the Greek crisis. Salvini called it a conspiracy and issued a threat to those responsible: "Nobody will stop me, nobody will stop us. You have won your small, anti-democratic battle today, but you will lose the war tomorrow."
Di Maio was also in no mood to rein in his fury with the president's decision and he indirectly accused Mattarella of high treason. The country, he said, needs a head of state who isn't controlled "by the ratings agencies, the banks or German interests."
Some of his supporters went even further on Facebook. "Mattarella must die," wrote one. "Luigi, strike fear in the heart of this piece of shit," wrote another. Indeed, the populist victory in Italy has gone hand-in-hand with a radicalization and dumbing down of the political debate, with no consideration at all for what is going on outside the country. And in a country where 60 percent of the population no longer read books in their spare time, the lack of a serious resistance to this development is perhaps not entirely surprising.
The news has triggered nothing but "contempt, disgust and anger" in her, says German publisher Inge Feltrinelli, widow of the billionaire and revolutionary Giangiacomo Feltrinelli and 60-year resident of Milan. La Feltrinelli is sharply critical of the new generation of politicians. She sees Di Maio and Salvini as "dilettantes" who were unfortunately able to generate support among the voters. The Italians, she says, need "rules and clear conditions -- more Europe, not less."
How Should Europe Respond?
Europe is now faced with the difficult task of finding an appropriate response to the new government in Rome. In Berlin, Chancellor Angela Merkel and Finance Minister Olaf Scholz have remained largely silent. They are concerned that anything they might say could be interpreted as an interference in domestic Italian affairs and result in even more anti-German polemics. There is nothing Germany can do, is the message being sent by the government in Berlin. Threats or warnings, German leaders are convinced, would result in a backlash.
But even if they aren't saying it, German political leaders are largely in agreement on one question: Among both Merkel's conservatives and in large segments of the center-left Social Democrats, it is an article of faith that Italy's struggles are less the result of austerity measures imposed by Brussels than they are the product of a country having lived beyond its means.
Still, the first cracks are now developing in Berlin over how Italy should now be dealt with. The Foreign Ministry, under the leadership of Heiko Maas of the SPD, argues that concessions should be made to Rome. His argument is that Germany's uncompromising approach to Greece during that country's crisis is what led to Berlin becoming a popular populist target in the first place.
In France, Emmanuel Macron is continuing to insist on the only solution that he sees as viable: a fundamental reform of the EU. Macron is also under pressure domestically to finally deliver results. The French president took a significant risk with his speech last year proposing far-reaching changes to the European block and he has a lot to lose in his own country. He has upped the ante in each of his speeches since and if nothing happens soon, there is a risk that his supporters might turn away out of frustration. Macron wants nothing less than a "re-founding" of Europe, as he said during his Sorbonne speech last September.
On Wednesday afternoon, he opened the annual OECD Ministerial Council Meeting with another passionate speech. "We need a more efficient response to the challenges of our era," he said. He didn't directly address the situation in Italy, but his comments naturally applied to the country as well. "We find ourselves at a turning point in our history."
When asked if all of these appeals will ever actually have an effect, the president's office at the Élysée Palace responds with a question of their own: What else can you do? It is to Macron's credit that he is continuing to insist on reforms and proposing solutions to problems. But he is largely alone. Paris could, of course, be more confrontational or simply stop proposing solutions, says a close Macron adviser. "But if Europe no longer has a voice, then it will be shut out, to put it mildly." Regarding Italy, the adviser says: "We are currently asking ourselves a lot of questions," adding that "nothing is predictable" when it comes to Rome at the moment.
The topic of Italy also played a significant role during a dinner on Wednesday hosted by European Budget Commissioner Günther Oettinger at the Hotel Dollenberg in Germany's Black Forest. He had invited a small group of European parliamentarians and Theo Waigel, the former German finance minister and one of the fathers of the euro.
Waigel related that when the euro was introduced, Italy promised that it would reduce its debt load but never actually did anything about it. As such, Waigel continued, it is time for European Central Bank President Mario Draghi to have a word with his fellow Italians. "As an Italian, he has more credibility than, for example, a German."
Jitters in Brussels
Having a word with the Italians is something that Oettinger tried to do this week, but he also managed to trip over his tongue in the process. "My concern and expectation is that the coming weeks will show that the development of the markets, government bonds and the economy of Italy will be so far-reaching that this will be a possible signal to voters not to vote for populists on the right or left," Oettinger said.
European Council President Donald Tusk sent off an angry tweet in response and Commission President Jean-Claude Juncker issued a statement saying: "Italy's fate does not lie in the hands of the financial markets." Oettinger issued an apology for his comments, but the Green Party is now demanding his resignation. European Parliament President Antonio Tajani is also said to have exploded over Oettinger's comments. The episode serves to show just how jittery people in Brussels are at the moment.
Officially, EU officials have taken a vow of silence, one that EU foreign policy chief Federica Mogherini, herself an Italian, has chosen to observe. Restraint is vital, she said during a Commission meeting on Tuesday, because Salvini and his people are just waiting to be able to launch verbal attacks on Brussels arrogance.
Just how difficult that can be became apparent on Thursday when Juncker said during an event in Brussels that, while he is "bound to Italy by deep love," he can no longer accept a situation in which the EU is made responsible for everything that goes wrong, particularly in the south. He declined, however, to become more concrete.
"Europe is allowed to make it clear to the Italians that their election decisions could have consequences -- for themselves, for the euro and for politics in the EU," says European parliamentarian Andreas Schwab, a member of Germany's Christian Democrats, by contrast. And his fellow German conservative in the European Parliament, Markus Ferber, said: "The worst-case scenarios would be if Italy became insolvent like Greece did, because no one wanted to loan it money. Then the troika would have to show up in Rome and take over the budget and the Finance Ministry. But with Italy, we are talking about 2 trillion euros of debt. It would massively exceed what Europe is able to handle."
'Italy Needs Its Friends'
An alarming trend can be observed across Europe, says Angelo Bolaffi, a philosopher and the former head of the Italian Cultural Institute in Berlin. "The longer the EU grows together, the more people are drifting apart from each other." The Fidesz party in Hungary, Front National in France, the FPÖ in Austria: In other European countries, Bolaffi says, there is just one populist party that has found success. "We are the only country with two, an unconventional dualism. What common goals might these two parties have? I can only think of hatred toward Brussels."
But, Bolaffi continues, Italy also has a fundamental problem. "Most Italians have no idea about the state and they are short-sighted, have no strategy and are thus at a constant risk of plunging into the abyss. But they stop shortly before doing so," he says.
Someone like Salvina, says Bolaffi, a "demagogo da quattro soldi," a second-rate demagogue, has an easy time of it with his fellow Italians. "If you want to understand us Italians, think of the story of Pinocchio, when the coachman promises to take all the boys with donkey's ears to Pleasure Island. But that is, of course, a lie and they all end up as slaves, as donkeys."
In the political world, he says, Italy is experiencing a "negative selection" in the Darwinian sense. It isn't the best of the best who are being chosen for senior political positions, but the greediest and most corrupt, Bolaffi says.
The current situation is serious, the philosopher warns. "Be careful. Italy is a dangerous country. If it is left alone, it can wreak incredible damage. Italy now needs its friends, particularly those in Germany."
By Tim Bartz, Fiona Ehlers, Julia Amalia Heyer, Christiane Hoffmann, Walter Mayr, Juliane von Mittelstaedt, Peter Müller, Dietmar Pieper, Christian Reiermann, Mathieu von Rohr, Britta Sandberg and Christoph Schult
- • Italian President Mattarella: The Man Who Wouldn't Yield
- • Italy's Strange Campaign: Berlusconi, Five Star and the Road to Political Gridlock