In this electoral round, the power of the current Prime Minister Matteo Renzi has been challenged by its major opponent, the Five Stars Movement, and weakened on the eve of another important political happening: the Constitutional Referendum in October 2016. Italy appears to be on a knife edge and these elections represent only a prequel of the political struggle that will permeate the Italian debate in the months to come. For further information please contact our offices in Italy: Milan: www.brunswickgroup.com/contact-us/milan/ Rome: www.brunswickgroup.com/contact-us/rome/

1. Everythingyoualwayswantedtoknow
aboutItalianpolitics*
*Butwereafraidtoask
ItalianMunicipal
Elections
June 2016

2. Results
 The ItalianMunicipal election system
envisages one ballotround in case no
candidate reaches50%+1votes. The
ballotround will take placeon the 19th
of June.
Resultsshowthatthetide isturning
and Partito Democratico (thecentre-
left wing party supporting Mr Renzi) is
having difficulties in keeping its
primacy in thepublic opinion. Onthe
other hand, theFive-Stars Movement is
themost popular party in Rome,
proving its strengthening political
position, and thesecond most voted
party in Turin, where Partito
Democratico is rooted and
traditionally strong.
Ballots are taking place in Milan, Rome,
Naples and Turin.
Preface
Thecurrent round of elections in
Italyappoints new mayors for
1,363 municipalities, including
some of Italy’s largest and most
relevant cities: Milan, Rome, Naples
and Turin. However, to reduce the
importance of theseelections to
thedimension of cities would be
terribly shortsighted: Italian
politics are extraordinary complex
and always influenced by the
changes of tide dueto unexpected
or even “minor” events.
Inthiselectoral round, thepower
of thecurrent Prime Minister
Matteo Renzi hasbeen challenged
by hismajor opponent, theanti-
establishment Five Stars
Movement. This hasweakened
Renzi on theeve of another
important political development:
theConstitutional Referendum
taking place in October 2016.
This analysis attempts to explain
thecomplex environment thatthe
Italian government is navigating,
taking into account current and
potential futurechallenges, aswell
asthedifficulties of a slow Italian
economic recovery.
City Candidate Party Results
Rome Virginia Raggi Five-Stars
Movement
35.3%
Roberto Giachetti Partito
Democratico
24.8%
Milan Giuseppe Sala Partito
Democratico
41.7%
Stefano Parisi Centre-right
coalition
40.8%
Naples Luigi De Magistris Left coalition 42.3%
Gianni Lettieri Centre-right
coalition
24%
Turin Piero Fassino Partito
Democratico
41.9%
Chiara Appendino Five Stars
Movement
30.8%

3. © Brunswick 2016 | 3
A challenging political
environment
Matteo Renzi loves comparing politics
to theinfamous Frank Underwood
story in “House of Cards.” However, a
more comparable example of Italian
political debate is “Game of Thrones,”
theferocious story of theSeven
Kingdoms and thestruggle for the
Crown. Actually, Italyand Westeros
share many features:strong internal
division; acontinuous (but non-
violent!) struggle between cities,
regions, parties and politicians; an
unpayable public debt; and an
apparently unstoppable economic and
political decline.
Metaphors aside, Italian politics are
embarking on aperiod of change. On
theone side, 41-year-old Matteo Renzi
is trying to strengthen hispower
within thePartito Democratico (the
centre-left wing party of which heis
theSecretary) to pushand complete
hisreformist agenda, as well as within
Italian governmental institutions, by
surrounding his “throne” with loyal
officials and top-level economic and
political advisors.
Ontheother side, Mr Renzi’s political
opponents are sharpening their knives
to take over thegovernment and set
different agendas, using every occasion
to challenge thePrime Minister’s
power.
To judge thesemunicipality elections
astheprize of thestruggle would be a
mistake. Thereal battle is taking place
in October thisyear, during the
constitutional referendum dedicated to
theextensive reforms thatMr Renzi,
together with Maria Elena Boschi –
who was considered theheroine of the
Italian reformist trend by The
Economist –hasbeen promoting for
thelast two years.
Briefly, thereferendum could change
theinstitutional structureof Italian
politics, reducing thescope of the
Senate to amere consultation chamber
for subjects and decisions related to
regions, giving theentitlement of
legislative power to theChamber of
Deputies.
According to detractors of suchreform,
thiswould constitutea dangerous
reduction of institutional
counterbalance to theChamber’s
prerogative, giving too much power to
theparties with thepolitical majority.
According to supporters, there is no
danger to theItalian republican
structure, and thisreform isgoing to
smoothen and simplify thelegislative
process.
Withoutentering into much detail on
theOctober referendum, one question
needs to be answered: is thisa
referendum on thegovernment,
meaning on MrRenzi’s political action?
Iftheanswer is “yes,” thenMrRenzi
himself hascalled for agreat social
mobilization for the“mother of all
(political) battles” as thereferendum is
expected to decide on the
government’s successor failure.

4. Brunswick Group
Italy Municipal elections
Mr Renzi hasbecome less powerful
thanhewas one year ago: trustin Mr
Renzi hasdecreased to just 27% of the
population, according to polls. Political
observers believe thehoneymoon
phase of every new government with
itscountry islimited in time, and Mr
Renzi is now reaching theend of the
wide support heinitially received from
Italian public opinion.
Thefirst causefor thisdecline is that
Mr Renzi promised too muchin too
short atime. Although thecountry’s
economic trend isslowly turning
positive, low economic growth rates
are not yet resulting in arelevant
reduction of theunemployment rate.
One of theprimary reforms of the
government, theso-called Jobs Act
(labour market reform), waspresented
astheturning point of theeconomic
crisis. Instead, employment hasbeen
among thelast economic variables to
rise with therecovery, and much of the
recent increase in theworking
population hasbeen dueto public
incentives. Therefore, many believe
thatthereform hasfailed to fulfilits
purpose.
Moreover, Partito Democratico is now
facing a crossfire of investigations, with
some institutional representatives
from theparty accusedof corruption or
illicit behaviour. On-going
investigations are weakening the
government’s support and boosting
populist parties suchastheFive Stars
Movement, which criticizes the
establishment under themotto
“Honesty!” shoutedin public squares.
Looking forward to2017
Constitutional Reform isapproved
by the October Referendum
Constitutional Reform isrejected
by the October Referendum
Matteo Renzi resigns and the
parliament isunable to form anew
government.
Elections in spring/summer 2017;
Mr Renzi usesthereferendum as the
strong narrative of hiscampaign and
tries to isolate internal opposition.
Matteo Renzi resigns and the
parliament isunable to form anew
government.
Elections in spring/summer 2017;
with theConstitutional Reform
rejected, MrRenzi is weakened and
results are uncertain.
Matteo Renzi does not resign and
carries on hispolitical struggle.
Political oppositions become more
aggressive, internal opposition inside
theparty tries to block reformist
process looking at theelections in
2018.
Thegovernment leverages thenew
institutional structure asastrong
narrative at theEuropean level.
Matteo Renzi does not resign, buthis
power is weakened by thedefeat of
thereferendum.
Political and internal oppositions
become more aggressive and the
government’s activity slows down.
These are just some of theissues
besieging thegovernment. The
migration crisis and thefear related to
thenew comers, theeconomic
situation, theon-going Italian banking
sector’s worries, and fading pan-
European sentiment are all gnawing at
thebase of MrRenzi’s political support.
That said, wewould consider it
unlikely for Mr Renzi’s government to
reach theend of thecurrent legislation
period in 2018 (theItalian legislative
period is five years, unless
unanticipated elections takeplace).
We seefour possible
scenarioahead:

5. © Brunswick 2016 | 5
Brunswick Group
Italy Municipal elections
Italyappearsto be on a
knife’sedge,politically.
Yesterday’smunicipality
electionsrepresentedonly
a prequelto the political
strugglethatwill permeate
the Italiandebatein the
monthsto come. Observers
dividethemselvesbetween
“optimists”on the
reformistapproachof the
currentgovernment,and
“pessimists”on thereal
possibilityfor Italyto
recover.
Asalways, thetruth issomewhere in
themiddle: on theone side, the
government agenda, helped by the
European Central Bank’s (ECB)
Quantitative Easing, together with the
weakening of theEuro,is pushing the
low-growth rate performance of the
country. Ontheother side, thereforms
thatItaly needs must go far deeper into
economic and social structuresthan
thoseimplemented to date. Itis
becoming clear that,if MrRenzi fails in
thereferendum in October because he
hasbeen weakened by internal
struggles and thedisappointing results
of themunicipal elections, new
scenarios may come into place thatwill
change futureexpectations for Italy.
Italy ontheedge

6. Brunswick Group
Italy Municipal elections
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