CENTRIST ESTABLISHMENT CRUSHED IN ITALY

Matteo Salvini of Lega

The Italian political establishment has now been crushed in Italy after a deal was made between two radical, insurgent, populist parties that scored big in the country's recent election. 

The deal between the nationalist, anti-immigrant Lega Party of Matteo Salvini and the techno-anarchist 5 Star Movement was made on Sunday (13th), and agrees the outlines of a governing program between the two parties.

In the election the Lega won 125 seats (+109) while 5 Star gained 227 seats (+119) in Italy's 630-seat parliament. This means that the two insurgent populist parties alone now have enough seats to hold the majority in Parliament and can thus form a two-party coalition, without any of the old parties of government, like the Socialists or even Silvio Berlusconi's centre-right Forza Italia.

Going into the election, Lega was allied with Forza Italia (104 seats (+1)) as well as two smaller parties, but does not need their support to form a government with 5 Star.

What we see in Italy is part of a wider movement in Europe, which has also seen the Alternative fur Deutschland Party break into the German Parliament and become the opposition party, and the election of relative "outsider" Emmanuel Macron as President of France. 

As reported in the Wall Street Journal:

The old center-right and center-left parties that built today’s EU are losing popular support across most of the Continent, as new rivals seize on voter frustrations including unemployment and fears about societal cohesion amid large-scale immigration from the Middle East and Africa, which has brought 750,000 migrants to Italy since 2011. The main beneficiaries are politicians who argue self-serving elites are robbing ordinary people of their livelihood or cultural identity—a narrative political scientists call populism.

While many of Europe’s rising populists are on the nativist right, others have roots in the anticapitalist left. Some—notably the 5 Star Movement—are an ideological hodgepodge united by their claim to offer a new politics. In a continent battered by a decade of crises, established parties have often tried to copy such insurgents’ policies or to enlist them as junior governing partners.

In Italy, however, antiestablishment groups are poised to take power on their own for the first time in one of the EU’s major countries.

So, what polices are we likely to see from Italy's new rulers? So far the two parties have reached agreement on slashing and simplifying taxes and boosting spending on pensions and benefits for the poor. 

As both parties also campaigned strongly on restricting mass immigration and the abuse of Italy's refugee policies, we are also likely to see a tightening of immigration restrictions and the increased deportation of illegal migrants and fake refugees. 

One of 5 Star's key pledges was to introduce a universal basic income, aimed at protecting the poor and unemployed. This enabled it to make big gains in the South of Italy, where poverty is a major issue. Lega meanwhile pushed for a flat-rate income tax of 15%. Both parties also opposed the rise in the retirement age, introduced by the previous government.

Taken together, these policies will put a great strain on Italy's finances, whereas deporting most of the 750,000 migrants to come to Italy since 2011 will make these spending plans possible.

Whatever happens -- budget crisis or mass deportations -- is likely to put strains on Italy's relationship with the EU, which will probably use the European Central Bank (ECB) to threaten the country to stay in line with general EU policies. 

In the past, Italy's shaky economy has been shored up by ECB interventions in the bond markets in order to stop capital flight. The new government will have to quickly come up with a strategy to avoid this German-controlled tool of economic blackmail.