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August 06, 2019

Macron's next bet: municipal elections

French municipal elections next year may seem insignificant to the outsider, but they are an important strategic battle for Emmanuel Macron to get a foothold into the 35,000 town halls throughout France. Conquering cities such as Marseille, Lyon or Bordeaux is crucial to building a local power base that will help him deliver reforms later. Some 72 sitting centre-right mayors and senior local officials have already announced they will back Macron’s party, including the mayors of mid-sized cities such as Angers, Tours, Orléans, Amiens and Nancy. The question is whom LREM will choose to endorse.

Macron's team has now chosen its candidates to run in the races. In some cases the choice went against their own MP. Michèle Crouzet, an LREM deputy from the department of Yonne, did not get on the ticket and thus decided to resign from the party. Others might chose to leave the party too. Since June 2017 LREM already lost 12 MPs and was defeated in one by-election. With 303 deputies, they still hold an absolute majority which requires 289 seats. After all LREM is a party that came out of nothing with no local party base.

In September there comes the second stage of the process. LREM will have to chose which of the outgoing mayors they will support. This will be a political choice among non-LREM members and is expected to cause further resignations according to l'Opinion

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August 06, 2019

A victory for Salvini and his coalition

One crisis that could have happened this summer didn’t happen. The Italian coalition will hold - at least for now. Yesterday, it survived an important confidence vote in the Senate, where its majority proved robust as 160 Senators voted in favour of a security bill. That bill in itself is important as it will massively increase the powers of the interior minister, namely Matteo Salvini, to frustrate the efforts of NGOs to pick up refugees in the Mediterranean and bring them to Italian ports. Salvini can now declare a national emergency and forbid a ship’s landing, use the Navy to support him, impose large fines, and even order the destruction of vessels that violate the rule. We will be watching these developments closely. These are important measures.

Another point of conflict in the coalition is the future of the high-speed railway to connect Lyon in France with Turin in Italy. It is ironic that the Lega of all parties is so desperately in favour of this trans-European network that links two of Europe’s most important industrial regions. The so-called TAV has emerged as one of the most contentious issues in the coalition. If Salvini gets his way - as we expect - it may be easier for him to compromise on the 2020 budget, which will be the next big hurdle. The economic slowdown is steeper in Italy than elsewhere, which is why we are not optimistic that Italy will be able to produce a Maastricht-compliant budget for next year.

The fall in eurozone bond yields has for now reduced anxieties about Italy's debt sustainability. Small swings in interest rates can have dramatic effect on a state’s solvency. The current extremely low level of rates also raises the economic room for manoeuvre for a fiscal boost. We expect the benefits of a moderate fiscal expansion to outweigh the disadvantages of another excessive deficit procedure. The economic case for a fiscal expansion is strong, in our view. The main debate will be about the size.

Taken together, we may find that the Italian coalition may be more resilient than some people expect. Five Star has every incentive to stay in government, given their slide in the polls and the Lega's strong performance. And Salvini is getting most of what he wants, and needs.

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