© Reuters. FILE PHOTO: Italy’s Prime Minister Giorgia Meloni reacts on the day of the informal meeting of European heads of state or government takes place in Granada, Spain October 6, 2023. REUTERS/Juan Medina/File Photo
By Angelo Amante and Giselda Vagnoni
ROME (Reuters) – Weak economic growth and high interest on the country’s huge debt are the main problems facing Italian Prime Minister Giorgia Meloni after her first year in power, an anniversary marked by an abrupt announcement she was leaving her long-time partner.
Meloni’s coalition, the first led by a woman in Italy’s history, was sworn in a year ago after a sweeping election victory and will soon cruise past the 14-month average postwar term life for Italian governments.
It was seen on taking power as the country’s most right-wing since wartime dictator Benito Mussolini, as Meloni’s Brothers of Italy party traces its roots to the post-fascist Italian Social Movement (MSI).
Yet Meloni, 46, set about quelling foreign concerns of possible extremism, forging good ties with allies by adopting a strongly pro-Western, EU-friendly stance and pledging staunch support to Ukraine in its war with Russia.
At home she pleased her rightist grassroots through measures to defend the traditional family, protect Italy’s cultural heritage and try to stem migrant arrivals.
“We have worked tirelessly to repay the trust and to demonstrate with facts that it was possible to build a different Italy,” she said in a video message this week.
However, an economic rebound from the COVID-19 pandemic has ground to a halt, with gross domestic product contracting by 0.4% in the second quarter, and analysts forecast Italian growth will be among the lowest in the euro zone next year.
That makes it harder for Meloni to keep her tax-cutting promises and makes Italy’s debt, equal to 140% of national output, vulnerable to market sell-offs.
“The economy is probably the toughest subject. The government has low margins in which to operate,” said Valentina Meliciani, an economics professor at LUISS university in Rome.
Last week Meloni weathered the first of several reviews on Italy’s debt when S&P Global Ratings confirmed the country’s BBB rating with a stable outlook.
However, the prevailing view among analysts is that the rating agencies will worsen Rome’s outlook while avoiding outright downgrades.
Meloni also has personal problems to deal with. She announced on Friday she was separating from her long-time partner, TV presenter Andrea Giambruno, after he repeatedly sparked outrage for sexist comments made on and off-air.
This month the government approved a 2024 budget with around 24 billion euros ($25.3 billion) of tax cuts and increased spending, despite a public debt that is proportionally the second highest in the euro zone after Greece’s.
The budget has not impressed investors, and exacerbated a long-running rise in Italian bond spreads.
The gap between yields on Italian 10-year bonds and the German equivalent is hovering around 2 percentage points (200 basis points), far higher than for any other euro zone country.
Meliciani said Italy’s hopes of reviving its economy and cutting debt were strongly dependent on effective implementation of investment plans financed through EU post-COVID funds.
So far Rome has struggled to meet Brussels’ policy conditions and to spend the money it has received.
On the international front, as well as her backing for Ukraine Meloni has largely avoided confrontation with Brussels despite her eurosceptic past.
She has also dropped the calls she used to make in opposition for a naval blockade to prevent boats leaving north Africa, despite her inability to halt the influx of migrants.
Arrivals on Italy’s coasts have surged to more than 140,000 so far in 2023, nearly double the same period last year.
“We expected Italy to be very tough (on immigration) at the EU level but we have seen a conciliatory attitude overall, they are working to find a common line,” said Enzo Moavero Milanesi, a former foreign affairs minister.
At home Meloni has so far avoided the domestic political chaos that dogged so many of her predecessors.
A divided opposition has helped her tighten her grip on power and keep her party at the top of the polls, with nearly 30% of voter support, against around 18.5% for the centre-left Democratic Party (PD) and 17% for the maverick 5-Star Movement.
Her party dominates its coalition allies, the League and Forza Italia, whose combined score remains below 20%.
Analysts believe a slice of centre-right voters switched to Meloni from the other two parties and are unlikely to shake the balance of power within the coalition by changing back again.
“Meloni came after a decade of political instability and voters floating across the party spectrum. The country looks now tired of this,” said historian and politics expert Giovanni Orsina. ($1 = 0.9476 euros)