If Meloni wants to achieve anything while in office, she’ll first need to tone down the retrograde rhetoric that characterized her campaign. Her Brothers of Italy party is squarely rooted in postwar neo-fascism, a legacy Meloni has at times embroidered with her own brand of euro-skepticism. Her campaign featured attacks on immigrants and what she called the “LGBT lobby.” She has sometimes echoed the xenophobic language of Hungarian Prime Minister Viktor Orban. It’s no wonder that the outside world has some doubts about her aptitude. She’ll need to decide if she wants to provoke or to govern.
The new government won’t take office until late October, but with an economy expected to grow by only 0.4% this year, Meloni has little time to lose. Italy’s public debt is now more than 150% of gross domestic product. Per-capita GDP hasn’t grown since 2000, and nearly a quarter of the country’s youth are out of work and not in school. Rising interest rates have sent yields on 10-year bonds to 4.3%, compared to less than 1% last year.
Reassuring investors that Italy can still manage its immense liabilities should be Meloni’s top priority. Selecting a competent economic minister would be a prudent first step. Next, her government should set a small number of clear goals when drafting its first budget. Simplifying the country’s convoluted tax system, something Meloni advocated on the campaign trail, would go a long way toward improving compliance and investment. Bolstering the flagging state education system — which is plagued by excessive bureaucracy, rigidities in hiring and centralization — would help lay the groundwork for growth.
Meloni will also need to ditch the corporatist and protectionist policies she aired on the campaign trail, which would only compound Italy’s chronic lack of productivity. To some extent, she won’t have a choice: Some $200 billion in loans and grants from the EU’s pandemic-recovery funds, which Italy desperately needs, were conditioned on a fiscal framework and set of reforms agreed to by Meloni’s predecessor, Mario Draghi. Any sign that Italy is reneging on its commitments would also make it ineligible for the new bond-buying instrument approved by the European Central Bank in July. It should help Meloni that Matteo Salvini’s League, a coalition partner, had a disastrous election, polling less than 9%. That should make it easier for her to resist his unaffordable campaign promises.
Beyond shoring up public finances, Meloni will face no shortage of challenges. Most prominently, Italy needs to continue working with its European and NATO allies to counter Russia’s aggression in Ukraine, even as sanctions-related energy costs soar this winter. Meloni has wisely resisted calls for more deficit spending to shield Italians from these costs. But she’ll have to find a better way to fund the support already announced; a windfall tax that Draghi imposed on energy companies has produced much less revenue than expected and faces legal challenges. Longer-term, Italy needs to further reduce its heavy dependence on Russian gas and stick to its energy-transition targets.
Meloni’s rise has been dizzying. But she should remember that what gets Italian politicians into power rarely keeps them there for long. The sooner the new government moves beyond the incendiary rhetoric and focuses on delivering stable government and growth, the better her chances of staying relevant — and in office.
More From Bloomberg Opinion:
• Italy’s Right-Wingers Spook Markets Less Than UK: Lionel Laurent
• Meloni Could Have More Sway in EU Than at Home: Rachel Sanderson
• Feminist or Not, Giorgia Meloni Has a Duty to Women: Maria Tadeo
The Editors are members of the Bloomberg Opinion editorial board.
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