Italian Prime Minister Giorgia Meloni has completed her first year in power, facing a slew of challenges including weak economic growth, high interest on the country's massive debt, and personal issues. Despite initial concerns over possible extremism due to her right-wing party's roots, Meloni has worked towards building good foreign relations by adopting pro-Western and EU-friendly stances. However, she now grapples with economic stagnation, with the GDP contracting by 0.4% in the second quarter, potentially hindering her tax-cutting promises.
One of the main obstacles Meloni faces is the stagnant economic rebound from the COVID-19 pandemic. Analysts predict that Italian growth will be one of the lowest in the euro zone next year. This hampers Meloni's ability to fulfill her promises of tax cuts and puts Italy's already high debt, equivalent to 140% of the national output, at risk of market sell-offs. Consequently, she has limited room to maneuver within the economy.
Last week, Meloni weathered the first of several reviews on Italy's debt, with S&P Global Ratings affirming the country's BBB rating with a stable outlook. Nonetheless, analysts anticipate that rating agencies may worsen Italy's outlook without downgrading it outright. On top of these economic challenges, Meloni recently announced her separation from her long-time partner, who had drawn criticism for his sexist remarks on and off-air.
Meloni's government recently approved a 2024 budget that includes approximately €24 billion ($25.3 billion) in tax cuts and increased spending, despite Italy's already high public debt. This budget has failed to impress investors and has further exacerbated the ongoing rise in Italian bond spreads. The yield gap between Italian 10-year bonds and their German counterparts currently stands at around 200 basis points, surpassing that of any other euro zone country.
A crucial factor for Italy's growth and debt reduction lies in the effective implementation of investment plans using EU post-COVID funds. However, Rome has struggled to meet the policy conditions set by Brussels and to efficiently allocate the received funds. The success of these investment plans is pivotal to reviving the Italian economy and reducing its debt.
Internationally, Meloni has shown support for Ukraine in its conflict with Russia, while managing to avoid confrontation with Brussels despite her eurosceptic background. Notably, she has abandoned her previous calls for a naval blockade to prevent migrant boats from leaving North Africa. However, Italy continues to face a significant influx of migrants, with over 140,000 arrivals on its coasts in 2023, almost double the figure from the same period last year. Despite expectations of a tougher stance on immigration, Italy has adopted a more conciliatory approach, seeking to find a common ground within the EU on this issue.
Despite the numerous challenges Meloni has faced, she has managed to avoid the domestic political chaos that plagued her predecessors. With a divided opposition, she has consolidated her power and maintained her party's lead in the polls, garnering nearly 30% voter support. In contrast, the center-left Democratic Party (PD) and the maverick 5-Star Movement trail behind with around 18.5% and 17% support respectively. A portion of center-right voters has shifted their support towards Meloni, and it appears unlikely they will switch back to the other parties, thus maintaining the balance of power within the coalition.
Giorgia Meloni's first year as Italy's Prime Minister has been marked by economic challenges, strained foreign relations, and personal struggles. While she has made efforts to assuage concerns of extremism, her ability to deliver on economic promises and manage the nation's debt remains in question. Furthermore, her personal separation adds another layer of complexity to an already demanding role. Nonetheless, Meloni has managed to maintain a commanding position within the coalition and the support of her party.