Barclays on Italy: presidential elections will shed light over the country’s political future
The election of the new Italian President, which will begin on April 18, will give an indication on the future political landscape, including when new elections might be held, Barclays warned in a research note.
An agreement between PD and PDL leaders on a candidate palatable to both parties could pave the way for a meaningful change in electoral law. This would reduce the risk that political impasse re-emerges.
“However, in a scenario in which the centre right is marginalised and the new President is elected without PDL and NL votes, we think that meaningful reform of the electoral law would be less likely. In fact, we would expect a spike in political rhetoric and a substantial drop in the appetite to cooperate between the centre-right and the centre-left,” economists said.
Given the centre right’s current small lead in the polls it may have little incentive to change the current electoral law, which favours political coalitions able to make strong alliances with local movements such as Northern League party
A scenario in which the new President is elected in the first three ballots (ie, with at least two-thirds of the votes) would signal that large political parties represented in Parliament have found common ground on how to manage the post-election phase following inconclusive February’s elections.
“Under this scenario, we expect the newly elected President to try to form a temporary grand coalition, charged with changing the electoral law, cutting the cost of the political system and also approving required minor fiscal adjustments, to meet a general government budget deficit target of 2.9% of GDP set for this year,” Barclays said.
This scenario would be consistent with new elections in Q1/Q2 next year under a new voting system which, if appropriately designed, would substantially reduce the risk that Italy is trapped, once again, into political paralysis.
Should the main parties not be able to find a common candidate to succeed President Napolitano in the first three ballots, the level of uncertainty would increase substantially.
“Under this scenario, we expect the newly elected President of the Republic to call for new elections in Q3 this year (most likely in October). We attach a low probability to a scenario in which new elections are held before August. Whatever the timing, though, perhaps more importantly, under Scenario 2, the probability of an outcome where the electoral law is reformed in a meaningful way would remain low, implying that the risk of political impasse at the next general election remains substantial,” Barclays said.