Rise in far-right populism rocks Italian polls
London
POLLS ahead of March 4 election indicate that Italy is heading for political gridlock - a dramatic rise in far-right populism is behind the uncertainty.
Italy's anti-migrant, Eurosceptic 5-Star Movement is running far ahead in the polls with an estimated 28 per cent of the vote. The party is not expected to govern on its own, but its leader Luigi Di Maio put forward four ministers in a potential governing coalition.
Illustrating the concerns, the euro has slid from its mid-February heights, falling by 3.3 per cent against US dollar, 2 per cent against Singapore dollar and 1 per cent against sterling.
Italian politics have been muddled over many years and Italian investors are relatively sanguine. The Italian stock market is only 7 per cent below its January peak, despite being relatively weak during the past few days.
Ten-year government bond yields are 1.6 per cent, despite the nation's huge 2.3 trillion euros debt (S$3.7 trillion) equivalent to 133 per cent of gross domestic product (GDP).
Surveys indicate that 40 per cent of potential youth voters could abstain. Italy is not far above Greece in unemployment with 11 per cent of the population jobless, compared to the 7.3 per cent average in the eurozone. The youth unemployment rate is as high as 32 per cent.
Italian media reports that the populace is deeply disenchanted with income, health and educational inequalities. An estimated 8.4 million Italians are poverty-stricken, according to national statistics.
The betting is that a centre-right alliance which includes Silvio Berlusconi's Forza Italia party, the far-right Lega Nord and the further-right Fratelli d'Italia, could form a coalition. Former prime minister Silvio Berlusconi said he would propose Antonio Tajani, current president of the European Parliament, as Prime Minister, if his bloc wins.
Mr Berlusconi can't take office himself because of a former tax fraud conviction.
If the right doesn't end up with a majority, commentators predict a hung parliament. Italy's Prime Minister Paolo Gentiloni, who heads the center-left Democratic Party, ruled out forming a coalition with Mr Berlusconi's alliance, after the forthcoming Italian election.
"We hope this will not be the case and that the centre-left that I represent will have a majority," Mr Gentiloni said on CNBC. He hopes that his party "will be the pillar of a possible coalition, that the populist anti-EU position will not prevail and that Italy will keep its stability".
But if no single party or coalition emerges with a parliamentary majority, Italy's President would probably ask parties to form a grand, cross-party coalition. Such an outcome could have a limited lifespan.
Roger Bootle, head of Capital Economics, contends that the Italian election "could have significant consequences throughout Europe", as a right-wing coalition would be predominantly Eurosceptic.
"Since the euro was formed in 1999, the Italian economy has grown by a mere 8.3 per cent, equivalent to only 0.4 per cent per annum," he wrote in an article for the Telegraph. "The Italian banking system remains highly risky, with bad and doubtful debts running at threatening rates."
