Salvini Goes on Offense in Final Push to Force Italian Election

Jerrold Colten and Lorenzo Totaro
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Rival Italian Parties Make Progress in Bid to Form New Coalition

(Bloomberg) -- Matteo Salvini dangled the prospect of tax cuts and a boost in government spending for Italians in a final push to force new elections that could secure him the premiership.

Salvini, who has called time on his alliance with the Five Star Movement and is seeking to cash in on strong poll ratings, promised in a radio interview Tuesday that the League would pass a 2020 budget containing tax cuts and investments worth 50 billion euros ($55 billion) to help revive Italy’s sclerotic economy.

The deputy premier’s latest salvo came just hours before Prime Minister Giuseppe Conte is due to address parliament in Rome, almost certainly signaling the formal end of his administration.

For an explanation of how this week’s events could play out, click here

Salvini’s power grab has run into trouble in recent days, with Five Star and the opposition Democratic Party -- unlikely bedfellows who have traded insults and clashed on policy -- weighing an alliance to thwart him.

Conte’s appearance in the senate at 3 p.m. local time could lead to a confidence vote, and if he loses it would start the process of installing an alternative government or herald a new national ballot. However, Italian newspapers, including Corriere della Sera, La Repubblica and La Stampa, reported Tuesday that he plans to forgo the vote and head directly to the Quirinale presidential palace after his speech to hand in his resignation.

Leading officials from the Democratic Party, or PD, have argued that their group should pair with Five Star, and there is a certain logic to a linkup now: polls suggest that Salvini would clean up in a snap election and both Five Star and the PD would likely be in for a long period in opposition.

Between them, Five Star and the PD have the votes to form a coalition and leave Salvini out in the cold. But that’s only if they can persuade President Sergio Mattarella that they can form a stable government capable of enacting key legislation like the 2020 budget and avoiding another damaging clash with the European Union over Italy’s precarious public finances.

The head of state, who has the sole power to appoint governments or call elections, may not be easily won over. The memory of the drawn-out consultations that led to the current administration will be fresh in his mind. Five Star, the biggest party in the 2018 election, played both sides, courting first the PD, then the League.

The president will be reluctant to allow for any of the back-and-forth negotiations that kept markets nervous and the country without a government for almost three months, newspaper Corriere della Sera reported on Monday.

While the rocky marriage between Luigi Di Maio’s Five Star and the League is almost certainly over, some media reports suggested Tuesday that the two parties could continue to govern without Salvini in the cabinet. Salvini is “no longer a credible interlocutor,” Five Star has said, vowing to back Conte.

Depending on whether they can persuade independents to join their alliance, Five Star and the PD could command about 180 seats in the 321-seat upper house, or Senate, compared with the ruling coalition’s 165. In the lower house, the two parties could cobble together a comfortable majority of around 360 seats.

‘Recipe for Disaster’

While that looks workable on paper, some analysts are skeptical.

“The PD and Five Star have diverging agendas in too many areas, including infrastructure and fiscal policy,” said Francesco Galietti, founder and chief executive officer at Policy Sonar. “What you have is a perfect recipe for disaster. I find it difficult to believe that a PD-Five Star axis can be pieced together in the first place -- let alone survive past the fourth quarter of 2019.”

A coalition with the establishment PD would also be a humiliating climbdown for Five Star, since the two parties have been at odds on almost every major issue for years.

For its part, the PD is hamstrung by internal divisions, with new leader Nicola Zingaretti so far unable to exert full control over the party’s lawmakers.

Most of them have ties to former Premier Matteo Renzi, who was the first to approach Five Star about forming a government. That prompted criticism from some senior PD officials, who accused Renzi of trying to weaken Zingaretti to pave the way for the creation of his own new party.

PD leaders are set to meet Wednesday to decide on the party’s position in the wake of Conte’s speech.

“If there won’t be the conditions for a strong new government than it is better to vote,” Zingaretti said Monday evening.

(Recasts with Salvini budget comments.)

--With assistance from Marco Bertacche and Sonia Sirletti.

To contact the reporters on this story: Jerrold Colten in Milan at jcolten@bloomberg.net;Lorenzo Totaro in Rome at ltotaro@bloomberg.net

To contact the editors responsible for this story: Ben Sills at bsills@bloomberg.net, Iain Rogers, Tommaso Ebhardt

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