EU proposal could prevent Italian government collapse

Subject

Outlook for Italian government.

Significance

The six-week delay in publishing the draft 'Relaunch Decree' underlines the deepening division within the coalition between the Five Star Movement (M5S) and the Democratic Party (PD). It also shows Prime Minister Giuseppe Conte’s lack of political support as he moves from tackling the medical emergency to addressing the deep economic downturn.

Impacts

• The EU’s proposed recovery programme will narrow the spread between German and Italian government bonds.
• Italy’s recession could increase the country’s demand for foreign direct investment from China.
• If the League’s support continues to decline, Salvini’s leadership of the party will come under greater scrutiny.