On February 24th and 25th, Italy will hold a general election which will produce a new Prime Minister. This occurs against the backdrop of a dismal economy where over the last 10 years the GDP did not expand –a net 0% growth rate—and with an unemployment rate in the double digits. Mario Monti, the present Prime Minister who came to power in November 2011 after the fall of Berlusconi’s government, was the consensus choice among all parties to push needed economic and market reforms. In the wake of the Greece default, Italian politicians and policy makers wanted to staunch the credibility bleed by chosing Monti, a technocrat and university professor, as Prime Minister. It was thought that he would be the one to push the necessary but unpopular reforms—those most demanded by investors and other international stakeholders.
Monti did indeed push many austerity measures until Berlusconi’s center-right coalition withdrew their support in December, triggering a new election. Italian elections are complex, and this electoral cycle has as many as 169 main parties; though only four coalitions really matter.
These include: Berlusconi’s center-right coalition, Bersani’s center-left coalition, Monti and his center group and finally the upstart Grillo and his five star movement.
As recently as early this month, most analysts considered Bersani to be the odds-on favorite to win the election. Monti had lost considerable credibility with the austerity measures he recently implemented, and Berlusconi is still seen as responsible for the general mess. Indeed, to reinforce this point, most polls, including our own Ipsos tracking poll, had shown Bersani and the center-left well ahead in the polls (see below).
However, over the last few weeks, the final outcome has become murkier. Indeed, the center-left coalition has dropped 9 points, while both Berlusconi and Grillo’s numbers have jumped up. This movement in the polls has added to the already considerable drama.
These events lead to two critical questions: why are we seeing movement in the polls? And who ultimately is going to win?
To answer these questions, I believe that we need step back and put the Italian elections into a broader context. To do this, we will look at a database now of 250 elections around the world which Ipsos has collected over the last five years. So what do we know?
First and foremost, we know that most voter calculus is quite simple: are people optimistic or pessimistic about the near-term? If they are optimistic, typically such scenarios favor the government candidate. Usually the economy is going well and scandals have been avoided. I call these continuity elections. In contrast, if people are pessimistic, such electoral contexts favor the opposition. Typically the economy is doing poorly and/or governments are engulfed in scandal. I call these change elections. Finally, there are those elections where voters are lukewarm in their optimism. Other factors like campaign efficiency, the power of incumbency, and control of the political machinery play a greater role. I call these middling elections.
So where does Italy fall on this electoral continuum?
Clearly, Italians want change. All the metrics—economic optimism, government approval, right track/wrong track—point in the same direction: that Italian voters are very unhappy. As a rule of thumb, change elections occur when government approval ratings dip below 39 points. Right now, Monti’s approval rating is at a dismal 33 points (see graph below). This strongly suggests that Monti has little chance of winning the election. Our own statistical model puts his chances at only 20%.
In a two-party system, the government-opposition model is quite straight forward: the party that isn’t the government is by definition the opposition. In a multi-party system without a second round, our analytical framework breaks down a bit with multiple ‘opposition parties’. The question for voters is: who really represents change among the opposition parties?
The answer to this question is not straightforward because each of the three main groups—center-right, center-left, and the five star movement—all are trying to make the case that they represent the needed change – that they are the ‘change’ candidates.
Berlusconi, for instance, is pushing for repeal of a major part of the austerity program—a strong economic populist message. Grillo and the five star movement, in turn, represent a wholesale change from the traditional party system—a rejection of the present system. There is widespread support for such a break in theory (see below).
In part, this is why both Grillo and Berlusconi have risen in the polls—their brand of change appeals to certain segments of Italian voters. However, there are limits to this. Grillo is most probably nothing more than a dissatisfaction option and has a ceiling of around 20% of the vote. Berlusconi, in turn, is trying to reinvent himself as the national savior and the agent of change. An interesting strategy because it was his government just a few short months ago that lead Italy into its present difficulties. Such strategies often backfire—as it is a fine line to walk between being both a change and continuity candidate at the same time.
In my view, Bersani and the center-left is the safer ‘change’ candidate when compared to Grillo and his five star movement. As for Bersulconi , it is easy to make the case that he is part of the problem, not the solution, as it was his legacy that Italy is confronting now. As such, I see Bersani as the favorite to win the elections this weekend.
If and when Bersani wins, he will need to form his government through a coalition with other parties—most probably with Monti and his centrist group. This seems likely, but in Italian politics nothing is clear until the last vote is counted and even then things aren’t necessarily certain as coalitions and partnerships can change with the political win. Let’s wait and see. Should be high drama.