Is Italy a weak link in Europe? Such fears have been often expressed in the past – witness Italy’s many changes of government and strong communist party in the Cold War era – yet nothing approaching a collapse occurred. Far from being a Trojan horse, Italy was one of the more solid members of the Western alliance, for all the surface turbulence of its political scene.

Today the Italian experiment with a left-right populist government, formed from an unlikely alliance between the leftist Five Star Movement (M5S) and the anti-immigrant, nationalist Lega (formerly the Northern League), is raising similar concerns, sending “ripples throughout the European Union and financial markets,” as GIS expert Enrico Colombatto wrote in an October 2018 report.

Abortive reforms

Italy’s current political predicament began with the leftist government of Prime Minister Matteo Renzi (2014-2016). Mr. Renzi and his Democratic Party, to their credit, promised to address Italy’s economic malaise – especially restrictive labor laws that kept workforce participation the lowest in the EU (36.4 percent) – via deregulation and revamping the country’s inefficient government.

However, the Renzi government’s trademark Jobs Act (2015), while simplifying employment contracts and making hiring and firing easier, was too limited to make an impact. As Professor Colombatto noted in a February 2016 report, such tinkering reflected “a self-delusion common in Europe” that the unemployment problem would simply “vanish due to faster economic growth and demographic trends.” What was needed was a more radical overhaul – sweeping away regulations and shaking up the educational and pension systems – to restore business confidence and create jobs.

But even that modest start showed something important, as Professor Colombatto pointed out. The lack of widespread public hostility toward the Jobs Act showed that many Italians – perhaps out of desperation – were ready to consider deregulation and even bolder measures. But Mr. Renzi did not follow through. Instead, he proposed a self-interested constitutional reform, which as GIS expert Dr. Alberto Mingardi noted in a June 2017 report, tried to streamline Italy’s governance without restructuring the country’s dysfunctional political system. Failure to pass it in December 2016 ended Mr. Renzi’s two-year premiership.

‘Populist’ majority

This loss of nerve accelerated the erosion of Italy’s mainstream parties and opened the way for antiestablishment movements – especially comedian Beppe Grillo’s idiosyncratic M5S, which tapped 31-year-old Luigi Di Maio as its new leader in late 2017, and Matteo Salvini’s Lega, whose euroskeptic, anti-immigrant line turned it from a regional party to a national force on the right.

Unlike most European countries, where such movements were doomed to the political margins or to junior partnerships with established parties, widespread disillusionment with the self-serving nature of Italy’s political elite – reinforced by the 18-month “technical” government of Prime Minister Paolo Gentiloni (2016-2018) – allowed M5S and Lega to harbor larger ambitions. By mid-2017, Dr. Mingardi predicted that it was entirely possible for the next election to produce a “populist majority” in parliament backed by more than 45 percent of the vote – adding that this total could be an understatement. (His prediction was spot-on, as M5S and Lega ended up polling 32.7 percent and 17.4 percent, respectively, in the March 2018 elections.)

Ties that bind

The ability of two counter-systemic movements to eject the established parties from government is what makes Italy unique among the EU’s major countries. Just as surprising is how two parties with such disparate ideological origins and constituencies could manage to cohere.

At bottom, M5S and Lega owe their success to a revolt against EU management – of the eurozone’s financial and debt crisis, which both parties refer to as “austerity” policies, and of the failure to protect against and share the burden of illegal immigration. This euroskeptic alliance of the left and right was cemented by a shared sense of grievance, and – at least on the part of Mr. Salvini – ambitions to overturn the alleged Franco-German domination of EU power structures.

Once in power, the M5S-Lega government – led by Prime Minister Giuseppe Conte, a Florentine law professor – dropped all talk about taking Italy out of the eurozone. But the migrant crisis provided more durable political fuel, especially for Mr. Salvini, who took the post of interior minister and promptly closed his country’s ports to rescued migrants. Partly this represented weariness with the almost 600,000 migrant arrivals via the Mediterranean in 2015-2017 (though this pales beside Germany’s 1.54 million arrivals in 2015 alone). Yet most of these migrants viewed Italy as a transit country, not a destination, while they represent perhaps the only way to plug the country’s negative demographic balance and provide new workers to support the social security system.

Even so, 42 percent of Italians polled in 2016 saw immigration as the country’s biggest challenge (second to unemployment, at 47 percent), and it was clear early on that the issue would decide the 2018 elections, GIS expert Alberto Mingardi noted in October 2017. Particularly telling was an increasing tolerance by the traditional hard-left M5S of crackdowns on migrants by the local authorities, which anticipated the party’s later decision to ally with the anti-immigrant Lega.

Tapping into these fears helped overcome what many saw as the ideological incompatibility of the two parties. The Italian case also shows migration’s transformative effect on European politics, as GIS expert Teresa Nogueira Pinto pointed out in a February 2019 report, because it is “fostering new political alliances based on euroskeptic and nationalist principles.”

Backward looking

At the same time, Italy’s “populist” parties nicely illustrate a feature of similar movements around the world – a yearning to preserve prized elements of the past. This gives the appeal of these ostensibly radical parties, even the left-leaning M5S, a distinctly status quo tinge, as Dr. Mingardi explained:

Widespread dissatisfaction with the Italian political class, perceived as self-referential and corrupt, has been feeding the M5S’s growth. The movement is sharply critical of the EU and what it calls its “austerity” policies. Its political program resembles an extreme left platform, with a touch of skepticism about the benefits of economic growth. In day-by-day political practice, however, Five Star tends to side with Italy’s established interest groups, from powerful trade unions all the way to taxi drivers. Somehow, its vociferous denunciations of the powers that be do not seem to apply to organized labor and public servants – groups that are part and parcel of this establishment.

This led the GIS expert to conclude in a July 2018 report that the experiment of a “left-right populist government could end up as a disguised version of more business as usual, or in an utter disaster.” Now that relative fiscal responsibility of Prime Minister Conte and his economic team have taken an immediate financial crisis off the table, the business-as-usual option seems even more likely.

But while that might sound vaguely reassuring, it only perpetuates the practice that got Italy in trouble in the first place. Forming governments at the cost of constant haggling and bargaining, including with the bureaucracy, traditionally led to “higher spending and, ultimately, the crushing public debt that still oppresses Italian taxpayers,” as Dr. Mingardi noted in June 2017. Even the short-term tax relief proposed by the Conte government is no substitute for structural reforms that leaders like Silvio Berlusconi failed to deliver over the past quarter-century.

European template

Italy’s antiestablishment alliance of left and right could become a template for European Parliament elections this year. The combination has already been tested in Greece (though the Independent Greeks are just an add-on to the radical left Syriza alliance) and in few other countries.

A more typical pattern is Spain, where alternative parties of the left (Podemos) and center-right (Ciudadanos) have been willing to form alliances with mainstream partners. Even so, the erosion of establishment parties has prevented the formation of durable governments – as the recent collapse of Prime Minister Pedro Sanchez’s Socialist-led coalition shows.

The Italian case shows the possibility of a different path – especially as its ruling coalition defies predictions that it would fly apart. After nine months in office, Prime Minister Conte’s government is more popular with voters than the six previous Italian cabinets at equivalent stages in their terms. This creates a pan-European