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June 06, 2017

Towards an Italian crisis

Italy will not only adopt the German voting system, but may even end up voting on the same day - September 24 - or possibly a week earlier, as La Republica writes this morning. But what outwardly appears to be the Germanisation of Italian politics is nothing of the sort. The most likely outcome of this process is a country without a budget and without a government, a chaotic scenario that may trigger a financial crisis. The Italian political establishment might want to reflect on the fact that what gives the German political system stability is not the electoral system, but a political consensus that you don’t keep on changing the vote system, and that respects legislative terms of office.

The new electoral law passed the first legislative hurdle yesterday, and now comes before the chamber of deputies. It is supported by a grand alliance of parties - the PD, the Five Star Movement, Silvio Berlusconi’s Forza Italia, and the Lega Nord - each for their own reasons. And they all want early elections. At present the centre-left, the centre-right, and Five Star, could expect to win around 20-30% of the vote each, not enough for a majority, so they will have to form a coalition.

Matteo Renzi is the main driver behind this process, because he sees new elections as his way back into power. Three of his predecessors have gone on the record comdemning him - Romano Prodi, Mario Monti, and Enrico Letta. 

As La Republica notes, the argument in favour of new elections is that the current coalition supporting prime minister Paolo Gentiloni no longer holds - partly also because of the controversies around the electoral law, as it discriminates against smaller parties like that of foreign minister Angelino Alfano, Alternativa Popolare - formerly known as the New Centre Right. The 5% representation hurdle will destroy this party.

Pierluigi Bersani is also appalled by the choice of a September election. He said the choice of the date is the utmost in irresponsbility. 

Frankfurter Allgemeine’s Rome correspondent sees a financial crisis coming up in the autumn because it will be impossible for the new government to agree on a 2018 budget in time. The article argues that both Renzi and Luigi Di Maio, the Five Star’s top parliamentarian, both want early elections because they do not want to be bound by the 2018 austerity budget that would otherwise be decided for them by the current administration. A September election would give them the opportunity to shape the budget themselves - clearly with the intent to defy EU rules. The paper also seems to mock Pierre Moscovici’s acknowledgement that he would respect exceptional circumstances in assessing Italy’s budget, a statement that implies that the Commission now categorises elections as exceptional. If the electoral law passes, it is unlikely that the Gentiloni administration will be able to pass the budget given the summer break and the electoral timetable Italy is then on course to miss the October 15 deadline by which member states have to present their budget to Brussels. The paper quotes Mario Monti as saying that Italy will come, during this entire process, under the watch of the Commission, and financial markets.

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June 06, 2017

Fake news trouble for Macron

A far-reaching labour reform plan from Macron’s camp was leaked to Le Parisien and caused uproar just days before the first round of the legislative elections. This document goes far beyond what Macron promised in the campaign, and delegates many aspects of labour law to negotiations at the enterprise level. There was an outburst of anger and exasperation from trade unions and from other political parties. The government insisted that this was a working document issued by a consultant outside the government before Macron became president. The problem with these "fake news" is that the deed is done: it gives candidates from opposition parties a perfect springboard to denounce Macron’s reform agenda. Jean Luc Mélenchon was quick to call it a "declaration of social war". Benoît Hamon tweeted: "pas de majorité pour Macron".

Republicans have no solid standing against Macron. They are instead trying to save what can be saved against the new wave of LREM candidates. Forget their promise to be the new majority Macron will have to work with: their aim is now much more modest. Their candidates are navigating with a "ni-ni" principle, neither rallying for Macron neither completely confrontating him either, writes the Journal du Dimanche.

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June 06, 2017

A new prime minister for Ireland

As expected, the 38-year-old Leo Varadkar was elected as the new party leader of Fine Gael last Friday. He will need to be confirmed as the new prime minister when parliament reconvenes on June 12. He will need the backing of independents and the abstention of Fianna Fáil to be elected prime minister. In total, Varadkar needs the support of at least 58 MPs. One of the independent MPs already said that he will not vote for Varadkar, which another two or three are still undecided, the Irish Times reports. They will meet Varadkar this week. Some of the hiccups are his positions on healthcare, so the article.

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June 06, 2017

Some thoughts on UK polling

We like Nate Silver when he discusses polling uncertainty, more than we do his actual forecasts. He was spot on when he criticised the preponderance of media analysis which misread the narrow polling lead for Hillary Clinton last year. His record in the UK has been less impressive, but he is making an important point about how to read the current batch of polls in the UK, which are all over the place. 

He notes that the polling organisations have learned from their errors in 2015 and last year, and build adjustments into their models to compensate for the fact that they historically underestimate the Conservative vote. He does not criticise the specific adjustments but notes that, when you adjust, you might end up overcompensating or undercompensating. But it is double-counting to make an additional adjustment when you say that the polls underestimate the Conservative vote. 

We agree with him that the best way to read the polls is take their average, which shows a Tory lead of some 7pp. He adds an error margin of 10%, which would suggest a plausible range from a 3pp Labour win to a 17pp Tory landslide. We think 10% is too large, even by the low standards of UK polls, but he is right to note that even a lower margin of error would still include the loss of a Tory majority among the possible outcomes.

Philip Stephens notes that expectations matter. Anything less than a majority of 50 MPs - up from the current 17 - would be seen as a serious disappointment by the Tories. A majority of less than 20 would cast doubt on Theresa May's ability to negotiate Brexit. We have argued before that the size of the majority will be less important for the Brexit negotiations than the five-year timetable, but we would agree that a wafer-thin majority may reduce her ability to compromise, and may risk a failure in the Article 50 negotiations.

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