Leader of the anti-establishment Five Star Movement (M5S), Luigi Di Maio delivers a speech during the presentation of the movement's parliamentary candidates for the upcoming March general elections, on January 29, 2018 in Rome.  / AFP PHOTO / Tiziana FABI        (Photo credit should read TIZIANA FABI/AFP/Getty Images)
Italy's Five Star Movement gains momentum
03:18 - Source: CNN
CNN  — 

Italy’s election result is yet another sign of popular resentments – against conventional politicians, the forces of globalization, immigration and the European “project.”

It wasn’t just the success of the anti-establishment Five Star Movement (M5S). Another party that surpassed expectations was the far-right League – formerly the Northern League – which did better than the center-right Forza Italia. The center-left coalition only managed around 22% and looks set to be the third-largest group in parliament behind the right-wing bloc and M5S.

In short, the center withered while populism thrived.

The result “will make for complex, unpredictable and lengthy coalition negotiations, which are likely to last well into spring,” according to Federico Santi at the Eurasia Group. And stable government will depend on the maverick M5S, which will be the largest party in parliament.

Prolonged upheaval and uncertainty may jeopardize Italy’s gradual recovery (growth was 1.5% in 2017, and for Italy, that’s success) and increase its borrowing costs. Italians simply didn’t feel times are getting better, despite four years of GDP growth. Unemployment is still close to 11%, with youth unemployment some 32%; productivity is poor by the standards of the Group of Seven countries.

The populist parties had a ready audience for their message. They accused Brussels of forcing reforms in Italy that make hiring and firing easier. Both M5S and the League had previously cast doubt on Italy’s membership of the eurozone, though more recently they softened that stance. They have expressed hostility to Europe’s major trade agreements with Japan and Canada. Many Italians blame the collapse of small and medium enterprises on unfair competition from Asia and elsewhere.

Tariff talk

Matteo Salvini's League party rode the wave of anti-establishment sentiment.

Matteo Salvini, leader of the League, was rare among European politicians in welcoming US President Donald Trump’s sudden announcement of tariffs on imports of steel and aluminum last week.

“If Italians will choose me as Prime Minister I will [impose tariffs] like Trump. I will defend Italian workers and entrepreneurs, even if it means putting up tariffs to protect the ‘made in Italy’ brand,” Salvini said.

The Five Star Movement’s promise of a guaranteed minimum income for the poor also struck a chord. Italy’s National Statistics Institute reported last autumn that while the top 20% of Italians had enjoyed the fruits of recent growth, the bottom 30% faced “poverty and social exclusion.” The percentage of Italians living in poverty rose to 20.6% in 2016. Much of that poverty is in the south, where Five Star won 65 out of 80 districts, according to preliminary data from the Interior Ministry.

Even if just a few of the promises made are delivered, that’s very probably bad news for Italy’s budget deficit and its national debt, which is a dizzying 130% of GDP.

Given the size of the Italian economy – the third-largest in continental Europe – a surge in borrowing costs could quickly spook the markets and recall the days of the “PIGS” (Portugal, Ireland, Greece and Spain) in 2008 when several European economies looked like they would sink.

Anxiety in Brussels

For the European Union, the Italian election result is yet another headache. No sooner had the long-running German coalition negotiations finally been resolved (nearly six months after the election) than a new political crisis erupted in another major EU state – one that might unstitch a painstaking recovery there and further afield.

The leader of the French National Front, Marine le Pen, congratulated Salvini and said that the European Union was about to have “a bad night.”

The EU is confronted with some tough decisions in the coming months. It is threatening to retaliate if the Trump administration proceeds with tariffs on steel and aluminum imports; the Brexit negotiations are approaching a critical moment; and the EU has to agree on a common position on any changes to the nuclear deal with Iran as demanded by Washington. Meanwhile, tough budget negotiations are getting underway.

But after the Italian result, France and Germany are the only heavy hitters embracing further European integration and a deepening of the eurozone.

Goodbye social democracy?

The pro-Europe social democratic model that has been part of the European landscape since 1945 has suffered one setback after another in recent years. In the UK, the main opposition Labour Party has swung to the left under Jeremy Corbyn, abandoning Tony Blair’s “Third Way.”

The Social Democratic Party in Germany has accepted a junior role in the new German coalition in part because it risked hideous losses in fresh elections, if polls were accurate. The party of Willy Brandt and Helmut Schmidt was barely keeping up with the far-right Alternative for Ge