Understanding the Italian election result, and what happens now?

Politics professor James Newell looks at the winners and losers of the Italian election, how we got here, and what happens next.

Understanding the Italian election result, and what happens now?
Italian Prime Minister Paolo Gentiloni gestures after casting his ballot. Photo: Andreas Solaro/AFP

The two great winners from the Italian election are above all the national-populist League (up from 4 percent to 18 percent) and the anti-establishment Five Star Movement (M5S) (up from 25 percent to 32 percent) which garners its support from across the country and from voters located across the political spectrum from left to right.

The losers are the centre-left Democratic Party (PD) (down from 25 percent to 19 percent) and Silvio Berlusconi’s Forza Italia (FI) (down from 22 percent to 14 percent), no longer the dominant force in its coalition thanks to the surge in votes for the League. The new great divide in Italian politics is no longer the one between left and right but the one dividing the mainstream-establishment parties on the one hand and the populists, with over 50 percent, on the other.

PD leader Matteo Renzi hands in his resignation. Photo: Alberto Pizzoli/AFP

How has this come about? Let us start with the centre-left. In government since 2013, the PD sought
to appeal to voters on the basis of its record, which was a creditable one.

It introduced important measures to combat poverty. Last summer it reached an agreement with the government of Libya which has stemmed the flow of refugees and asylum seekers reaching Italy from across the Mediterranean. The Italian economy is reviving. The government has been praised by the OECD and in other quarters for a series of structural reforms deemed essential to raising productivity and

The problem was that the man who most personified these successes – the PD’s Prime Minister of 18 months, Paolo Gentiloni – was not his party’s leader and therefore the PD suffered from a considerable handicap, in an era of mediatized and personalized politics. Gentiloni was unable to translate his considerable personal popularity  — he was ranked repeatedly as the country's most liked politician — into support for the PD as a party.

More generally, the PD, like parties of the centre-left elsewhere in Europe, has suffered from the loss of any kind of cultural ascendency since the collapse of the Berlin Wall. It has incorporated the neo-liberal narratives of its adversaries on the right and in so doing failed to offer representation to a working class that now feels threatened by the effects of globalization, especially austerity and mass migration. The left’s natural constituency has been left prey to alternative appeals, and the inevitable consequence has been a dramatic advance for the populist right represented by the League.

The Five Star Movement, meanwhile, has succeeded in winning votes in several quarters. It ran a highly professional campaign in which it successfully portrayed itself as both a party of anti-establishment protest (personified by Alessandro Di Battista who significantly had a front-line role but was not actually a candidate) and as a party of government (personified by its youthful prime ministerial candidate, Luigi di Maio).

Luigi Di Maio poses with supporters after casting his vote. Photo: AFP

In this way it was able to mobilize those driven by the long-standing and deep-seated anti-political sentiments of Italian voters; those driven mainly by disappointment with the outgoing government, and those who might otherwise have been attracted by the new-found moderate profile of an 81-year old Berlusconi who was once an anti- establishment figure but who, having had several turns at the helm, no longer convinces.

What now then? Let us begin with the institutional trajectory. The current government will remain in office until some time after the new Parliament meets for the first time on March 23rd to elect the presidents of the two branches of the legislature, the Chamber of Deputies and the Senate. The outcome of these elections could give some indications, if they have not already emerged from public debate in the run-up, of the governing alliances possible.

Then, the President of the Republic (Sergio Mattarella) will begin consultations with the parties with a view to identifying a governing majority and a person able to lead it. If, and only of, there is reasonable certainty about this, the President will make a formal prime ministerial appointment by giving a PM candidate a full mandate to form a government. Once appointed, the new government will have to overcome the hurdle of confirmatory votes of confidence in both chambers of Parliament. If this can't be achieved, Italy will be left in the hands of a caretaker government.

Italy left in limbo after populist surge in election
Journalists wait in the League's press room. Photo: Piero Cruciatti/AFP

What is the composition of the new government – if one emerges – likely to look like?

On the one hand, one might argue that the mainstay of the incoming government will be the Five Star Movement – this on the basis that, as it is the largest party but without a majority, it is too small to govern alone but too strong to be excluded: there is no majority for a ‘mainstream’, FI-PD, coalition, and the parties of the centre right (the League, FI and Brothers of Italy) do not command a majority either.

On the other hand, the parties of the centre right constitute the largest single coalition represented in Parliament and the League’s Matteo Salvini has explicitly ruled out a governing arrangement with the M5S. This is understandable: Salvini will want to inherit Berlusconi's support and thus consolidate his leadership of the centre right. He will not want to waste such an opportunity by playing ‘second fiddle’ to a government led by Di Maio.

Meanwhile, the PD has also ruled out governing with the Five Star Movement, with departing leader Matteo Renzi saying the PD's new role will be in opposition. So the future of the Italian left looks grim indeed – but so too does the future of Italy and of Europe. For the former, there is the prospect that the M5S fails successfully to complete its transition from party of protest to party of government, as it grapples with the difficulties of making decisions that will inevitably have winners and losers, and so ends up fuelling the already high levels of popular disenchantment with Italy’s political class.

For Europe, there is the near certainty of conflict between an incoming government and the Brussels institutions given that both the M5S and the League have built their remarkable successes on growing Euroscepticism. For those Italians who are comfortable with the cultural changes of globalisation, in sympathy with the left’s internationalist themes and now the bedrock of what remains of the left, the outcome of the election will have been a very sad one indeed.


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Who will pay less income tax under Italy’s planned reforms?

Italy is planning an overhaul of the tax system meaning new income tax rates for many - but who will benefit the most, and least?

Who will pay less income tax under Italy's planned reforms?

Italy’s government on Thursday submitted the text of a long-awaited tax reform bill which ministers say will be the first step in a sweeping overhaul of the system planned by 2027

As previously reported by The Local, the bill will introduce a raft of major tax changes aimed at gradually reducing Italy’s notoriously high tax burden and making investment in Italy more appealing. 

The plan includes a substantial change to Italy’s main income tax, Irpef (Imposta sui Redditi delle Persone Fisiche), with the number of  tax brackets dropping from four to three.

READ ALSO: Flat tax for all? Italy announces plan to overhaul tax system

This change is expected to mean a new tax rate for many workers in Italy starting from next year. But who’s going to benefit the most from the changes? 

Here’s what we know at this point. 

Irpef, which applies to all employees, many self-employed workers (regular partita Iva holders, but not those on the flat tax rate) and pensioners, currently counts four brackets, which are arranged as below:

  Income (annual) Irpef rate
First bracket Up to 15,000 euros 23 percent
Second bracket Between 15,000 and 28,000 euros 25 percent
Third bracket Between 28,000 and 15,000 euros 35 percent
Fourth bracket Over 50,000 euros 43 percent

The coming tax reform will reduce the number of tax brackets down to three, with the second and third bands being merged into a single one.

The tax rate for the lowest earners is expected to remain unchanged at 23 percent (for those earning 15,000 euros a year or less).

The tax rate should also stay the same for the highest earners taking home 50,000 euros a year or more, at 43 percent.

But middle earners who are currently in the second or third bracket may end up paying more or less tax – and it’s still unclear exactly what will happen. 

READ ALSO: The tax changes in Italy to know about in 2023

While Thursday’s announcement confirmed the number of tax bands will drop to three, the newly published bill didn’t specify what tax rate the new band would carry nor confirm how rates in other bands would be readjusted. 

However, Meloni’s cabinet is reportedly considering two options. 

First scenario

Under the first, and currently more likely, option, the new middle bracket will mean all taxpayers earning between 28,000 and 50,000 euros a year will pay a 33-percent rate.

Rates for the first and last brackets would remain the same.

This would mean all those who are currently in the second (income between 15,000 and 28,000) and third bands (28,000 to 50,000) would see their tax rate drop by two percent next year and subsequently benefit from sizable cuts to their Irpef payments. 

  Income (annual) Irpef rate
First bracket Up to 28,000 euros 23 percent
Second bracket Between 28,000 and 50,000 euros 33 percent
Third bracket Over 50,000 euros 43 percent

Second scenario

Meloni’s government is also considering a second scenario, with a 27-percent rate for a larger middle band – an option that would be much more costly to the state, and so seems less likely.

This would mean people currently in the second bracket (15,000 to 28,000) will see their tax rate increase by two percent, while those in the third bracket (28,000 to 50,000) would benefit from a whopping eight-percent cut

Rates for the first and last brackets would again remain the same.

  Income (annual) Irpef rate
First bracket Up to 15,000 euros 23 percent
Second bracket Between 15,000 and 50,000 euros 27 percent
Third bracket Over 50,000 euros 43 percent

Which path will the government go down?

While it was hoped that the bill’s text would clarify what rate the new band would carry, there are currently no details as to which option the government intends to go with.

That said, the first option seems to be the more likely one at this point in time, not least because implementing it would reportedly cost state coffers around 6 billion euros, whereas the second option would present the treasury with a 10 billion-euro bill.

Further information over which route the government will ultimately go down should emerge in the coming weeks as the bill goes through parliament. 

And even the possibility that Meloni’s executive might end up adopting an Irpef system other than the two described above cannot be ruled out at this time.