Italy’s League leader faces friendly fire over budget

ROME/PADUA: Italy’s deputy prime minister, Matteo Salvini, normally relishes confrontation, but now the firebrand populist is under attack from a place he calls home.

Dissent is growing in his League party’s political heartland, the industrial north, adding to pressure on Salvini and his coalition partner to reverse course on their 2019 budget.

“I always thought the League was able to help people who work - real people - and for this I had put my trust in them at this historic moment,” said industrialist Patrizio Dei Tos, who had high hopes when the League took power six months ago. Now, he and other northern entrepreneurs are not so sure.

Since the League and the anti-establishment 5-Star party formed a government, the economy has gone into reverse and the new administration’s big-spending budget plans have sent interest rates up and

prompted fears of another banking crisis.

In the regions of Lombardy and Veneto, which together account for a third of the national economy and are run by League administrations, small to medium-sized businesses have begun to openly question party leader Salvini’s strategy. “We are focusing on running the country according to emotions instead of the numbers,” said Dei Tos, whose wood-flooring firm Gruppo Labor Legno has annual sales of around 40 million euros ($45 million).

“We must be careful not to push our luck.” Even as Salvini, who is also interior minister, wins national popularity from his crackdown on immigration, his core constituency of family entrepreneurs, from the self-employed to rich industrialists, fear the economy is already in recession and the government’s spending plans will make things worse.

Salvini is stretching the League’s brand, winning new voters but straying somewhat from his northern base. He is basically holding firm for now and the League is ready only to make a minor cut to the 2019 budget deficit target of 2.4 percent of GDP, senior party sources said.

But dissent in League heartlands adds to the intense pressure on him to give ground on the budget in a confrontation that the European Commission and investors believe could undermine the euro zone.

The deficit target is three times the amount

pencilled in by the previous administration, and has been rejected by the Commission as a breach of EU rules requiring Rome to steadily reduce its public debt burden.

Italian bond yields exceed those on safehaven German bonds by almost 3 percentage points, double the spread that prevailed before the government was sworn in. That has prompted lenders to raise interest rates and fanned fears of financial instability, since banks are large holders of government bonds.

Milan’s stock index has fallen by a fifth since mid May. Growth fell 0.1 percent in the third quarter, with some economists predicting another contraction in the fourth as consumption and investment weaken. Last month, consumer and business confidence touched twoyear lows.

Feeling abandoned

Alberto Bombassei, co-founder and chairman of auto-parts maker Brembo, based in Lombardy, notes that his firm has lost almost a quarter of its value since the new government was sworn in.

“For many, the problem is 5-Star but even our good chap Salvini has agreed on measures he shouldn’t have agreed on. Both have abandoned the business community,” said Bombassei, whose company employs more than 3,000 in Italy.

Vincenzo Boccia, head of Italy’s biggest business lobby Confindustria, once held high hopes for the League, telling a meeting of industrialists in the northern city of Vicenza in September: “The League is close to the working class and to the entrepreneurs. We have very high expectations.”

Now, he voices deep disappointment at the way the coalition is managing the eurozone’s second-biggest manufacturer.

“The budget does very little for growth and Italy could tumble into recession. A consistent part of our members have voted for the League but 100 percent of those I have met are against this fiscal plan,” Boccia said in a TV interview.

Confindustria wants Rome to boost infrastructure investment and says the budget instead focuses spending on welfare measures: a League promise to ease retirement rules and a 5-Star pledge to introduce a kind of universal income to fight poverty.

On Monday, Confindustria joined other employers’ groups representing 65 percent of GDP to demand the government change course and boost investment. League politicians deny they are under pressure from their supporters to change course on the budget, saying the unhappiness is directed at 5-Star rather than Salvini. —Reuters