More than 20 years later, the Italian right is making similar promises. But revisiting the past is usually disappointing.
The ring-wing party trio, led by Giorgia Meloni, Matteo Salvini and the timeless Berlusconi, unveiled their joint manifesto last week. Given that polls suggest their coalition will score a strong victory in next month’s snap election, this draft policy is important. The 17-page document touches on the economy, foreign policy, Christian values and everything in between, but it can essentially be boiled down to patriotic talk and a cocktail of tax cuts. It suffers from a chronic lack of detail on big issues like how to stimulate the economy. It’s hard to take a program seriously if it mostly repackages old slogans.
Much of the program is based on the promise of a flat income tax. The idea is an old classic of the Italian right, and the problems surrounding it remain. For starters, it contradicts the general consensus across Europe that taxation should be progressive, especially on income, so the more you earn, the more you are taxed. Yet Berlusconi is asking for a 23% flat tax for families and businesses, and he wants it done within 100 days in office. Salvini goes further, suggesting that he wants to extend a flat rate of 15% within 5 years.
Interestingly, Meloni is more coy about a flat tax. She did not really commit to the details and speaks of a gradual deployment.
Salvini and Berlusconi argue that cutting income tax brackets would both unleash growth, as purchasing power is freed from taxes, and tackle tax evasion, a real problem for Europe. Italy. Economists warn it could instead create a hole in the national budget without actually supporting much-needed growth or wiping out the underground economy. The fact that Italy’s debt has risen since the last election in 2018 – to around 150% of gross domestic product from 130% – means the right has less leeway for such fiscal experiments this time around.
The terms debt and deficit are not even mentioned in the manifesto. Although these topics may be unpopular, Italy cannot ignore them. Its credibility with the markets and the European institutions which finance billions depends on it.
When former European Central Bank chief Mario Draghi was appointed to government in 2021, the idea was that he would finally deliver key structural reforms in return for EU funding. Italy has since then been the largest recipient of pandemic loans and grants. The current thinking in Brussels is that even with Draghi gone, the next Italian government will stay the course. Investors are hoping for the same.
The right-wing manifesto challenges this vision. Meloni, Salvini and Berlusconi make it clear that they will use all European resources at their disposal and suggest that they could revise Draghi’s plan once they have a government. However, deviating from the former Prime Minister’s roadmap will surely cause turbulence in the markets. This could make it more difficult for the ECB to deploy its anti-fragmentation tool. The European Commission would likely freeze payments from the pandemic recovery fund if Rome rolls back reforms or fails to implement agreed ones.
Although Italexit may be irrelevant, the transition to a Meloni government would not be without risk. She owes her rise in the polls to staying out of the Draghi coalition and playing the agitator in many cases. She has so far been a force of opposition, and her constituents expect her to bring some kind of break with the status quo.
She is trying to soften her image on the international stage, suggesting that her party is not a threat to democracy or Italy. But it’s unclear how long she can play a double game that appeals to her base at home and meets the expectations of overseas investors. This is the fine line on which Italy’s future hangs. For all its grandiose talk, the manifesto offers little visibility in which direction the pendulum will swing.
This column does not necessarily reflect the opinion of the Editorial Board or of Bloomberg LP and its owners.
Maria Tadeo is Bloomberg Television’s European correspondent based in Brussels where she covers European politics, economics and NATO.
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