Europe Politics

'There is a rift': Italy's leaders aren't even hiding their disagreements anymore

Key Points
  • Italy's deputy leaders Matteo Salvini and Luigi Di Maio were thrown together a year ago when they formed a coalition government.
  • Their political backgrounds and priorities differ.
  • They are rivals in forthcoming European Parliament elections later in May. 
Italy's Labor and Industry Minister and deputy Prime Minister Luigi Di Maio (L) and Italy's Interior Minister and deputy Prime Minister Matteo Salvini (R) wait for the swearing in ceremony of the new government led by Prime Minister Giuseppe Conte at Quirinale Palace in Rome on June 1, 2018.
ALBERTO PIZZOLI | AFP | Getty Images

Italy's deputy leaders Matteo Salvini and Luigi Di Maio were thrown together a year ago when they formed an awkward coalition government, but now their tense alliance seems to be unraveling.

When Salvini and Di Maio — the leaders of the nationalist Lega party and anti-establishment Five Star Movement (M5S), respectively — joined forces and took on the role of deputy prime ministers in a new government (having installed something of a caretaker prime minister in Giuseppe Conte) it was expected that there would be bumps along the way given their ideological differences.

Not only were there differences on the importance they placed on topical issues like immigration (a bugbear of the Lega party) but on spending with varying priorities — M5S had promised a universal basic income for the poor, for example, while Lega wanted to introduce a flat tax rate of 15%.

Still, they put up a united front when the EU told the coalition last year that their 2019 budget plans would break previously-made promises to rein in Italy's budget deficit.

But tensions and differences have undoubtedly been growing between the two and they are starting to spill into the public sphere ahead of European parliamentary elections later in May, where the parties will be competing against each other.

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Corruption clash

Most recently, differences have surfaced between Salvini's economic adviser Armando Siri (a driving force behind Lega's flat tax policy) who is at the center of a corruption probe.

M5S and Di Maio have called on Salvini to pressure Siri, an undersecretary in the Transport Ministry, to quit his post. When M5S member and Transport Secretary Danilo Toninelli stripped his underling of his responsibilities as an investigation was launched into Siri's conduct in late April, it prompted a clash with Salvini who said Siri should "absolutely not" resign, Reuters reported.

Di Maio said after Salvini's comments that "nobody is opening a government crisis" but that he "cannot accept that the undersecretary remains in office."

The case appears to be cementing cracks between Salvini and Di Maio. The latter made another call Tuesday for Lega to oust Siri: "I make a final appeal to the Lega — get Siri to quit and don't make it come to a showdown," Italian news agency ANSA reported.

Di Maio added that a "reaction from the political world is needed" to tackle corruption in Italian politics which is a key priority for his movement.

Deputy Prime Minister and Labour Minister Luigi di Maio(L), Italian Prime Minister Giuseppe Conte(2L), Italian deputy Prime Minister and Interior Minister Matteo Salvini(2R) and Italian Economy and Finances Minister Giovanni Tria(R) hold a press conference on the Italian budget on October 15, 2018 in Rome, Italy.
Antonio Masiello | Getty Images News | Getty Images

The case has put Prime Minister Conte in a difficult position, but on Wednesday he decided to sack Siri.

Meanwhile, Salvini reportedly said Tuesday that the differences between his party and Di Maio's were not limited to just the Siri case. "It seems clear to me that there is a rift with the M5S and not just on this (issue)," he told Mediaset television, according to a translation by ANSA.

"There are different viewpoints on the TAV (the Turin-Lyon high-speed rail link), on autonomy (for some regions) and immigration," he noted.

Elections

Analysts largely see the public show of differences as political campaigning ahead of the EU elections.

The vote is seen as a barometer of support for both parties, and a litmus test of Euroskeptic sentiment, and comes after disappointing regional election results for M5S and gains for Lega.

"It is inevitable that the two parties forming the coalition tend to highlight their differences ahead of elections," Lorenzo Codogno, founder and chief economist of LC Macro Advisors, told CNBC Wednesday.

"However, there are also serious dividing issues that may lead at some point to a government crisis, but maybe not immediately. Salvini is the only one who could pull the plug and seek another coalition, but while there is an interest to stick together, the government will not collapse."

Codogno did think there is a high chance of a snap election, putting no more than a 5% probability on spring 2020 elections and a 40% probability on elections by mid-2020. "Things may change if the Lega wins big at the European elections," he noted.

The same point was echoed by Barclays economist Fabio Fois who said that if Lega performed well in the EU elections, it could seek to reshuffle the coalition in its favor.

"Our baseline is that the coalition will remain in office, but if (the) Lega does really well at the EU elections (gaining 35%+ of the vote) a coalition reshuffle might happen ahead to budget season," Fois told CNBC Wednesday.

There is little appetite to hold a snap election ahead of what is likely to be another contested budget season with the EU, Fois noted, but elections could take place next year. He also believed that Salvini could become Italy's next prime minister.