M5-NL strong and could get stronger

We were wrong on the materialisation of early elections, but we continue to see strong odds in favour of a 5 Stars victory next year – in our view, a 5 Stars-led government is as likely as a centre-right one, led by the Northern League.

Here are a few factors to consider:

The support for the 5 Stars movement is no longer rising, as parts of the electorate are disappointed with its performance. However, its emphasis on reducing the cost of politics, trying to focus attention on boosting personal well-being, and the fact that the party is not afraid to propose and discuss bolder policies, are strong selling points for a voter base of a country that has been stagnating, de facto, for a decade and is continuing to experience a weakening of its industrial base.

The Northern League – the most Euro-sceptic party at the moment in Italy – has a young, charismatic leader, and is not afraid to propose often extreme proposals on the thorny topics of immigration, taxation and wages. We believe that the Northern League is likely to be the most popular party of the centre-right coalition by next year. So, if a centre-right coalition materialises after the 2018 elections, the Prime Minister’s position should also be decided by them.

The Democratic party remains strongly supported – currently polling around 28% – but we believe that this is as far as it goes (at least, as long as Berlusconi remains in the race). PD’s support exists because it is perceived as being the party to continue what has been done recently; it is exactly because of this that it cannot get any stronger, in our view. The economic data are improving in Italy, but our proprietary survey shows that only one in three Italians believe that the economy and their living standards are somewhat better than before.

If the next Italian government is led by 5 Stars or/and the Northern League, we believe that the biggest policy changes will be: taxation (lower), and a moderate, but not insignificant, loosening of the fiscal goals. It will not be about the EU(ro) membership, even though the leading party would be Euro-sceptic.

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