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Italy's government seems to be at breaking point — here are 5 reasons why it's going wrong

Key Points
  • Tensions in Italy's coalition government appear to be growing with differences of opinion between the ruling Lega party and 5 Star Movement (M5S) becoming more pronounced.
  • The alliance between the right-wing Lega and anti-establishment M5S is fraught with tensions.
  • There have been disagreements over policy and personnel.
(From L) Italy's Deputy Prime Minister and Minister of Economic Development, Labour and Social Policies, Luigi Di Maio, Italy's Prime Minister, Giuseppe Conte and Italy's Deputy Prime Minister and Interior Minister, Matteo Salvini on October 15, 2018.
NurPhoto | NurPhoto | Getty Images

Tensions in Italy's coalition government appear to be growing with differences of opinion between the ruling Lega party and 5 Star Movement (M5S) becoming more pronounced.

Thrown together a year ago following an inconclusive general election, an alliance between the right-wing Lega and anti-establishment M5S had raised eyebrows from the off, but now it looks increasingly likely that the coalition could collapse and prompt fresh elections.

The ruling parties and their leaders -- Lega's Matteo Salvini and M5S' Luigi Di Maio who both serve as deputy prime ministers -- appeared united last year in their 2019 budget as they pledged to cut taxes and raise welfare spending.

They also appeared united in their defiance against the European Commission, which repeatedly warned Italy to rein in its spending and lower its budget deficit. The government has also clashed with Europe on immigration policy and integration.

But cracks in the veneer have appeared since then and differences of opinion, policy and ideology – and even the budget now - between the parties and leadership seem to be turning into more of a daily occurrence.

Meanwhile, the insistence from both parties' that all is well in the coalition camp has all but disappeared and particularly so in the run up to the European Parliament elections this week in which the two parties are rivals.

Frayed tempers between the two parties prompted Prime Minister Giuseppe Conte, who was appointed by Di Maio and Salvini, to cancel a planned ministerial meeting Monday.

Somewhat optimistically, Conte has insisted that after May 27 (when European parliamentary elections have ended) the atmosphere will be "completely different." That might be wishful thinking given the growing animosity between the Lega and M5S leadership, Lega's Salvini and Prime Minister Conte, and government ministers and officials.

CNBC looks at five current sources of tension between Lega and the 5 Star Movement:

1) Immigration

Immigration control has always been central to the Lega's policies and the party has wasted no time in implementing hardline anti-immigration laws once it was in government.

Informally named after Interior Minister Salvini, the "Salvini decree" (also known as the "security decree") tightened immigration and citizenship laws, and essentially limited asylum seekers' rights. Critics say the measures punish the vulnerable but conservative lawmakers insist they are necessary to help Italy which has struggled to cope with an influx of migrants, largely from Africa. M5S was more ambivalent about the measures and had tried to amend the decree.

Salvini, who also closed Italy's ports to NGO-run search and rescue vessels carrying migrants rescued in the Mediterranean, expressed fury this weekend when a German NGO vessel defied an order not to enter Italian waters. He also opened a new front of tension with coalition partner M5S and Prime Minister Conte who he said had been too lenient towards migrant rescue boats.

On Friday, Salvini reportedly stated that "the premier (Conte) and the 5-Star (M5S) minister (Di Maio) don't come into it, human traffickers won't get to Italy any more." Di Maio responded by saying that Italy had seen strongman leaders before "and we certainly don't miss them," ANSA news agency reported. Di Maio also accused Salvini of arrogance.

2) Spending

Last year, Salvini and Di Maio appeared united enough to have big spending plans for Italy, much to Brussels' dismay. While Lega wanted to cut corporate taxes and to introduce a "flat tax" rate, M5S meanwhile had promised voters a universal basic income. Now the government is struggling to maintain campaign spending pledges with stabilizing the country's fragile finances and economy.

The European Commission threatened to punish Italy (which has the second largest debt pile in the euro zone after Greece) if it exceeded budget deficit targets and rules.  After appearing to try to appease the commission, Lega seems bullish again about breaking the rules, making suggestions that it could cancel a planned sales tax rise and could just increase public borrowing.

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

This has put Economy Minister Giovanni Tria (who is not allied with either ruling party) in a difficult position. On Monday, Tria said it was "impossible" to stick to deficit and debt cutting commitments while cutting taxes and hiking spending. "The government will need to choose," Tria said, Reuters reported.

Meanwhile, Salvini said Monday that the only way to reduce debt is to cut taxes to spur growth and that EU fiscal rules should be revised because they hamper growth. These comments, reported by Reuters, come after Salvini said last week that Italy should breach the EU's 3% deficit limit if necessary to boost the economy and create jobs.

But last Friday Di Maio poured cold water on any M5S backing of that plan, saying the movement would not back a budget law that causes Italy's big public debt to climb even higher.

3) Family

Another bone of contention is welfare. M5S' Luigi Di Maio, who is also Labor minister, wants to implement a so-called 'Family Decree' that would give low-income families an allowance to help raise their children. Di Maio also proposes cutting nursery fees and discounts on diapers but he has clashed with Lega's Family Minister Lorenzo Fontana over the plan; Lega wants to block the decree.

On Friday, Di Maio said the government's future was tied to the family decree, stating, " "We can split on everything in this government, but not on the family," he said, adding that the "destiny and survival of the government is at stake with this decree."

4) Corruption

While Lega's bugbear is immigration, M5S has made anti-corruption and graft measures a key policy area. Thus, when a corruption probe was recently launched into a Salvini's economic advisor Armando Siri, Lega did not take the move well.

Di Maio repeatedly called for Siri, who denies wrongdoing, to quit his role as undersecretary in the Transport Ministry (which is led by a M5S member) but Salvini backed his advisor and insisted he should retain his post until the probe was completed.

That was overruled when Prime Minister Conte sacked the junior minister earlier in May causing more friction with Lega's Salvini.

5) Education

Another spat between Lega and M5S emerged last Friday but this time, it was over a teacher who had been temporarily suspended from her job because her students had compared Lega leader Salvini's security and migrant decree to the race laws of Benito Mussolini.

Salvini called the comparison "disrespectful" while M5S said the suspension – which was ordered by Education Minister Marco Bussetti (a Lega member) - was tantamount to censorship.

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