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Italy in fresh political chaos amid calls to impeach the president

Italy was mired in fresh political chaos after the populist parties' bid to take power collapsed with the president set on Monday to appoint a pro-austerity economist to lead a technocrat government ahead of new elections.

Published: 28 May 2018 07:40 CEST
Italy in fresh political chaos amid calls to impeach the president
Italian president Sergio Mattarella (centre) arrives to speak to press on Sunday. Photo: Vincenzo Pinto/AFP

President Sergio Mattarella vetoed the nomination of fierce eurosceptic Paolo Savona as economy minister, enraging the anti-establishment Five Star Movement and far-right League and prompting their prime minister-elect to step aside.

“I have given up my mandate to form the government of change,” said lawyer and political novice Giuseppe Conte, 53, plunging the country into a political crisis nearly three months after March's inconclusive general election.

Mattarella said he had accepted every proposed minister except Savona, who has called the euro a “German cage” and said that Italy needs a plan to leave the single currency “if necessary”.

The leaders of Five Star and the League, Luigi Di Maio and Matteo Salvini, denounced the veto, decrying what they called meddling by Germany, ratings agencies and financial lobbies.

Mattarella has summoned Carlo Cottarelli, an economist formerly with the International Monetary Fund, for talks Monday, with a temporary technocrat government on the table as Italy faces the strong possibility of new elections in the autumn.

READ ALSO: Who is Carlo Cottarelli, the technocrat who could be Italy's next PM?Who is Carlo Cottarelli, the technocrat who could be Italy's next PM?Photo: Stephen Jaffe/IMF/AFP

Cottarelli, 64, was director of the IMF's fiscal affairs department from 2008 to 2013 and became known as “Mr. Scissors” for making cuts to public spending in Italy. He will struggle to gain the approval of parliament with Five Star and the League commanding a majority in both houses.

“They've replaced a government with a majority with one that won't obtain one,” said Five Star leader Luigi Di Maio to supporters at a rally near Rome.

'Diktats'

A former judge of Italy's constitutional court, Mattarella has refused to bow to what he saw as “diktats” from the two parties which he considered contrary to the country's interests. He had watched for weeks as Five Star and the League set about trying to strike an alliance that would give Italy's hung parliament a majority.

Mattarella said that he has done “everything possible” to aid the formation of a government, but that an openly eurosceptic economy minister ran against the parties' joint promise to simply “change Europe for the better from an Italian point of view”.

“I asked for the (economy) ministry an authoritative person from the parliamentary majority who is consistent with the government programme… who isn't seen as a supporter of a line that could probably, or even inevitably, provoke Italy's exit from the euro,” Mattarella said.

READ ALSO:

The president said Conte refused to support “any other solution” and then, faced with Mattarella's refusal to approve the choice of Savona, gave up his mandate to be prime minister.

The leaders of Five Star and the League, Luigi Di Maio and Matteo Salvini, were infuriated by Mattarella's refusal to accept Savona, a respected financier and economist.

Salvini, who was Savona's biggest advocate and a fellow eurosceptic, said on Sunday that Italy wasn't a “colony”, and that “we won't have Germany tell us what to do”.

“Why don't we just say that in this country it's pointless that we vote, as the ratings agencies, financial lobbies decide the governments,” a livid Di Maio said in a video on Facebook.

Later on Italian television he called for impeaching Mattarella. “I hope that we can give the floor to Italians as soon as possible, but first we need to clear things up. First the impeachment of Mattarella… then to the polls,” Di Maio said.

READ MORE: An introductory guide to the Italian political system

An introductory guide to the Italian political system

Photo: Alberto Pizzoli/AFP

By Terry Daley

For members

ECONOMY

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?

Published: 17 March 2023 13:41 CET
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.

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