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Analysis | Meloni’s stateship sails into turbulent waters

As Italy’s far-right government prepares to take power, the guardrails are already lifting.

Giorgia Meloni’s cabinet is becoming an uneasy marriage between technocrats — especially at the Treasury Department — and the demagogues who will fulfill its agenda of curbing immigration, arguing with the LBGTQ+ community, and promoting what they call “natural.” called family. History suggests that any relationship with those bedfellows will be short-lived.

Italy’s new government will not be appointed until at least mid-October. But there have been ruffles since almost immediately after the last votes were counted in the September 25 election. It’s true that Meloni has a strong hand after her brethren of Italy won some 26%, putting her in line to become Italy’s first female prime minister and the leader composing the next coalition. She will need that power to keep her right-wing allies in check.

Matteo Salvini, leader of the anti-European League party, has already publicly demanded the interior minister’s order, otherwise he would refuse to join the government. The key to Meloni’s political rise was, of course, her refusal to join Mario Draghi’s unity coalition, which she could then attack at will. But Salvini should have limited influence. League support has halved from the last vote in 2018 to just 8.5%. Meloni, who has pledged to continue to support Ukraine and NATO, is understandably reluctant to give a Vladimir Putin fanboy his favorite post.

Coalition friends like this one explain why Meloni needs a steady-handed corps to maintain the investor confidence needed to service a national debt that’s roughly one and a half times gross domestic product. Senior politicians in Rome say President Sergio Mattarella (who will have the final say on the composition of the government) is behind the scenes, suggesting that Meloni give the three heavyweight ministries – justice, foreign affairs and finance – to technocrats. Insiders say Draghi and Meloni have been talking to each other since before the election — as polls showed she was likely to become prime minister — and the former president of the European Central Bank has also pushed the idea.

Of these, the most crucial portfolio is the Ministry of Finance. The expectation that Meloni will appoint a seasoned official to lead the agency explains why markets have not moved substantially against Italian debt, traders say. But even here, there are signs that things may not be going the way Meloni does. Her best choice was widely known Fabio Panetta, a member of the ECB’s Governing Council. Panetta, a Bank of Italy conservative and veteran who had never been involved in government before, seemed a good fit for a leader who has ushered in a new era in politics. Still, Panetta has apparently made it clear to European colleagues that he does not want the job, Bloomberg News reports.

There are other potential candidates who need to reassure business leaders and investors and refute Meloni’s call to renationalize Telecom Italia and block the acquisition of Italy’s largest airline ITA by Certares, a US private equity firm. Possibilities include Domenico Siniscalco, a Morgan Stanley banker who served as Secretary of the Treasury 16 years ago; Vittorio Grilli, another former Treasury Secretary turned banker (at JPMorgan Chase & Co.) and Luigi Buttiglione, an independent economist and former strategist at the Brevan Howard hedge fund. She could also convince incumbent Daniele Franco to stay.

The complications of bringing together a governing coalition from the various adversaries do not bode well. There is a precedent here. Siniscalco resigned in 2005 after barely a year as finance minister under Silvio Berlusconi. The economist was a guarantee to investors of both Italian debt and the euro. When he quit, he reportedly said “I can’t take it anymore” and walked out after coalition partners rejected his deficit-reducing measures.

Investors should hope that the oft-quoted adage of Giuseppe Tomasi di Lampedusa’s “The Leopard” about Italy that “things have to change to stay the same” doesn’t turn out to be true again.

More from Bloomberg Opinion:

• Italy’s right wingers scare markets less than UK: Lionel Laurent

• Meloni could be more influential in the EU than at home: Rachel Sanderson

• Meloni continues to play with Salvini. Just wait and see: Maria Tadeo

This column does not necessarily reflect the views of the editors or Bloomberg LP and its owners.

More stories like this are available at bloomberg.com/opinion

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