In this episode, Dominic speaks to Lorenzo Cordogno, founder of Lorenzo Codogno Macro Advisors and visiting professor at the London School of Economics and Political Science on the risks associated with financial markets, Teconomy and geopolitic in Italy post-election.
Lorenzo is the author of several articles on academic journals, newspapers and books, speaker at conferences, established commentator on economic and market issues. Before joining the Italian Treasury, he was regular commentator on international and Italian broadcasting services including CNBC, CNN, Bloomberg TV, BBC World.
The International Risk Podcast Transcript
Well good morning I’m Dominic Bowen and I’m the host of the international risk podcast today. We’re joined by Lorenzo cadonno lorenzo is the author of several articles newspapers books and he’s a speaker at conferences and he’s established commentator on economic and market issues before joining the italian treasury where he was the director general. He was a regular commentator on the international and italian boardcaring services including Cnbc Cnn Bloomberg Bbc and many others. Since 2015, he’s the co-found of Lorenzo Godonia macro advisors and also a visiting professor at the London school of economics and political science and he’s also a teacher at the european college of bruges welcome to the podcast today lorenzo.
Lorenzo Codogno 00:52
Dominic Bowen 00:56
Well I’m looking forward to our conversation today lorenzo and it’s particularly timely knowing noting the current machinations in italy well president Biden seems quite gloomy about recent election results in italy and he even said at a conference last week well you saw what happened in italy and you see what’s happening all around the world. And he was referring to what he sees as a backslide of democracy. But I think in reality what he’s referring to is the election of right-wing parties in many countries like in italy and even more recently in in Sweden as well now that we know the election results. What do we think. The victory of a right-wing party means to italy.
Lorenzo Codogno 01:35
Well first of all, it’s not surprising that president Biden had a very say cool reception of the outcome of the elections in italy I mean Georgia Maloney and Salvini where stone supporters of the Trump administration and they’ve been in the us supporting again the conservative party. So again, certainly not the same kind of alliance that Biden would like to see. But having said that the links between the US and and Italy are very strong and I don’t think they will change in other words despite a reception in Washington.
I don’t think the underlying relationship between the 2 nations so will change that much. Meloni is very much in favor of the nato alliance and has actually repeatedly said that is a very strong support for Nato and she is very much committed to fighting along with Nato and against the invasion of Ukraine. So I don’t think that foreign policy has for the international alliances will change that much with the new government now what is the new government and doing for it, the change is quite substantial because first of all, Meloni will likely be appointed as prime minister. And as you know in italy it is the party that propose and then the president the republic will take the decision. But to to give a mandate then finally parliament will approve but most likely will be here. And she will be the first and female prime minister in italy which I think in itself is a good achievement for the country. But of course it will also be the first right leaning clearly right leaning and government for italy.
And now the big question mark is whether the new government will keep its kind of right leaning attitude or will try to move to the center and because brothers of italy Meloni’s party got about 26% of the vote which is a big chunk. You cannot run a a far right party with 26% of the votes. Ah ah, voters don’t voted for a far right? party they voted for a a mainstream conservative party which brothers of italy is still not really they they had to evolve they had.
Still to move in that direction. So I think if Meloni moves in a direction of a traditional conservative mainstream party at european level probably voters will get what they ask for, but we will see.
Dominic Bowen 04:54
I mean you brought up a lot of fantastic points including having the first female prime minister in italy and I’d like to unpack some of those issues but I might stay within maybe europe and look at the macrolevel trends. I mean italy’s move to the right has highlighted europe’s geographic reality and it’s placed a eurosceptic party in a position to lead 1 of the european union’s founding members countries. You know the third largest economy in Europe being italy now right-wing activists and leaders across Europe have immediately haled Meloni’s victory and her party’s rise as a historic message to Brussels. How do you think Brussels will respond and what options does the european union have and I guess secondly how do you think the european union should respond to the election results in italy?
Lorenzo Codogno 05:44
Well I think the european union should not respond because you should respect the will of the people in different countries. Okay, but this will change the political dynamics at european level for sure. And so as I said before I don’t expect major changes in the international alliances but there could be major changes within the EU. Meloni’s brothers of italy sides with law injustice in Poland in the conservative and reformist party at the same time. Mateo Salvini is a league sides with urban and fidesh in Hungary and now urbanan has been increasingly sidelined.
And we have seen that there are some disturbing links with Putin and I think it will be difficult for him to reenter the the debate in Europe in a convincing way. However, law and justice which was heavily criticized and by the commission and by european council for introducing and pieces of legislation they were against that he perceived the rule of law I think and I change attack a little bit I think the presence of a very strong alliance with another big country like italy would actually strengthen probably the idea that this party given the role that they is playing. Accepting refugees from Ukraine could actually be mainstreamed and become again part of the european family so I cannot completely rule out the possibility that. And Meloni together with law injustice in Poland will try in the future to kind of move in the direction of the rear of the european popular party and that would actually strengthen the position of these 2 countries because they would reenter the the important and policymaking debates in Europe which would they would not really be part of if they stay outside of the major groupings. So the political not dynamics in Europe will definitely change.
Dominic Bowen 08:17
No and that’s understandable now you mentioned that Meloni is a strong supporter of Nato and is backing Nato’s support for Ukraine. But as you said noting that Meloni’s own party is aligned with the law and justice party in Poland and. Of her coalition partners is is closely tied with viktor albann and we even heard partners like Berlusconi making excuses for Russia’s invasion of Ukraine. How is she going to reconcile these differences noting that so many italian governments have collapsed after about eighteen months this is a very significant issue and the energy crisis the war in Ukraine are all going to be big issues for her. How is she going to reconcile these differences between her and her own coalition partner?
Lorenzo Codogno 09:02
Yeah, well first of all, let me say that despite the the conflict in Ukraine being an existential issue for europe and for italy as well and oddly enough but not surprisingly I would say. And the political campaign was focusing mostly on domestic issues rather than the war on Ukraine and so forth. Now it is true that of the three major parties of the coalition at least two so selvini in Berlusconi had that reasonably strong links with Putin in the past, or at least they supported part of the of the policies that Putin implemented and now, they have distanced themselves very clearly from Putin’s invasion. I think the risk is that if the crisis in Ukraine escalates and there is an escalation, that leads to maybe a wider conflict and so forth with the deeper economic consequences at some point. These parties might be stress test meaning they might have to take really a very strong stance against Russia which might be a bit problematic for italy but again I think they have decided where to stand before the elections and so I don’t inspect the major changes there. I think the support to Nato is now pretty much widespread in the center right coalition despite again, some disturbing links with Russia either personal or party wise that we have seen in the past.
Dominic Bowen 10:52
And more broadly. What do you see as the main risks and opportunities that this potential government brings to the international community?
Lorenzo Codogno 11:01
Well first of all I mean this is not a victory of the central right in my view. It is a big loss for the central left. In other words it was a decision by the central left to go to elections disunited. In 3 global blocks effectively that given italy’s election system by default produced a big defeat. So I think the central life needs to kind of ah rethink the future rethink future alliances and the strategy for the future. So my guess is that this government ah will last. You mentioned before, usually governments tend to last no more than a year and a half or something like that and this change this time. It might be different because first of all the central right that know very much that this is the chance of the lifetime for them, especially for Meloni this is a party that has been sidelined in the past. It’s true that he wasn’t government when Berlusconi was prime minister. Also it is true that it is in some local government and municipalities and regions, but generally speaking they have never had important positions. It is absolutely essential for Meloni and brothers of italy to present themselves as reliable and skilled people that can actually govern, can being government and that they are keen to make sure that this government lasts for at least 5 years, so at least until the next Election. So I think there is very strong glue that is power between these 3 forces. Everything could happen in italy and you know we have seen some very surprising developments in the past. So you never know but my baseline scenario is that this government will last five years, so meaning also that for a first time in many years Italy has a government that can actually plan for the medium term and which is good whether they will take advantage of this opportunity. It remains to be seen for sure in the near term. The important test that will be the budget. So what the new government will do in terms of budget measures. My guess is the focus this time will be very much on the cost of living crisis and everything else will be either postponed or there will be some symbolic moves but nothing real. Okay, so most of the budget will be just that coping with the cost of living crisis which has become the main topic of debate in italy these days, and most other countries in Europe I would say, so the policy and action in the near 10 will be very much focused on 1 single topic.
Dominic Bowen 14:23
Yes, and a very important topic in nearly every country around the world right? now you you said very interestingly that this perhaps is not a big win for the centre right? But instead a big loss for the centre left I think during an earlier interview you declared that the next government will be ah, a far right? government. But you said that it was not right to call it a a fascist government. Why is that where seeing the word fascist used by a lot of journalists and a lot of media houses in their publications. Why do you disagree with that term?