Italy’s new far-right government

This is an audio transcript of the FT News Briefing podcast episode: Italy’s new far-right government

Marc Filippino
Good morning from the Financial Times. Today is Tuesday, September 27th, and this is your FT News Briefing.

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The Bank of England tried and failed to reassure markets and the pound had another terrible day on Monday. Italy is set to have a far-right leader for the first time since World War 2. And the US is loosening some sanctions to improve Internet access in Iran. I’m Marc Filippino, and here’s the news you need to start your day.

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China’s economic output is set to fall behind the rest of Asia for the first time in more than 30 years. That’s according to new forecasts from the World Bank. The report says China’s zero Covid-19 policy and its property market meltdown are to blame. Intense Covid-19 lockdowns have cut consumer spending. And a historic collapse of the property market has some analysts worried that the country has a structural problem. The rest of East Asia and the Pacific is expected to grow almost twice as much as China in 2022. That’s thanks to high commodity prices and an end to strict lockdowns in other countries.

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Italians want a far-right party in power. The results of Sunday’s election showed Giorgia Meloni’s Brothers of Italy party won a decisive victory in the snap election. She’s now in position to take over for outgoing Prime Minister Mario Draghi. To talk about what’s next for Italy, I’m joined by the FT’s Rome correspondent, Amy Kazmin. Hi, Amy.

Amy Kazmin
Hi.

Marc Filippino
So Amy, how did we get to this point?

Amy Kazmin
I think we need to clarify that this is not actually the first time that a far-right party will be in the government in Italy since the World War 2. In fact, predecessors to the Brothers of Italy had been junior coalition members of conservative governments led by media tycoon Silvio Berlusconi. So, in fact, in the last few decades, there have been this normalisation of the sort of neo-fascist parties that originally came out of the loyalists to Benito Mussolini. So they’ve been pulled in from the margins over a period of time, and they have been part of governments. What makes this one different is this time, the far-right party is gonna be in the driving seat, the driving force of the rightwing coalition, rather than a junior partner with a centre-right coalition.

Marc Filippino
Why did Meloni and the Brothers of Italy win?

Amy Kazmin
Well, I think it’s a combination of factors. Over the last ten, 15 years, Italian voters have actually been flitting from one political option to the next. So Italians have been dissatisfied with what politicians have been delivering them. They’ve had two decades of declining living standards, and they feel that politicians make and break promises with astonishing regularity. So one of the things that Giorgia Meloni had going for her was that she has been in opposition for ten long years. So she could make the case, try me, you haven’t tried me. Maybe this time it will be different and we’ll give you something better than what previous governments haven’t been able to give you.

Marc Filippino
I see. So what is the biggest priority for Meloni’s new government?

Amy Kazmin
Giorgia Meloni will take the reins of power at a time of incredible difficulty for Italy. Under Draghi’s leadership, there was a lot of optimism about the country’s future and prospects. Now that optimism is gone, Italy has been hard hit by the repercussions of Russia’s invasion of Ukraine. Energy prices have soared. Households and small businesses are reeling under the impact of skyrocketing energy bills. So there is a lot of pressure on the economy. And I think whatever Giorgia Meloni might want to focus on, she’s gonna have no option but to focus on this cost of living emergency.

Marc Filippino
So you can’t do that without working with the rest of Europe. What does Italy’s relationship with the rest of Europe look like under Meloni’s new government?

Amy Kazmin
Well, under Draghi, Italy’s relations with Europe have been outstanding. Giorgia Meloni, over her long political career, has basically spent a lot of time bashing Brussels. She has really lashed out in some pretty fiery ways and been very hostile. But of course, Italy needs money from Brussels. At present, Italy is in the midst of this €200bn Covid recovery plan. And the money is released based on the achievement and attainment of certain milestones, which Brussels evaluates. So Giorgia Meloni is gonna have to forge a working relationship with Brussels, and she has tried to suggest that she would try to build that relationship. But the problem is people will remember the things she said. And I think they’re gonna be taking a very cautious wait and see attitude to see how she and her government are to deal with.

Marc Filippino
Amy Kazmin is the FT’s Rome correspondent. Thanks, Amy.

Amy Kazmin
Thank you.

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Marc Filippino
Investors were still shaky on Monday, even after having the weekend to digest the UK government’s new mini budget. On Friday, Chancellor Kwasi Kwarteng announced £45bn in tax cuts. It sent the pound tumbling and government debt sold off big time. Monday, traders picked up right where they left off, even with a surprise announcement from the Bank of England. The FT’s Tommy Stubbington has more.

Tommy Stubbington
Let’s just recap the rollercoaster ride that the pound had on Monday. So very, very early in the morning, we saw it absolutely plunged nearly 5 per cent, down to the lowest against the dollar on record. It then recovered and partly recovered because there were building expectations in the market that the Bank of England might step in with an emergency interest rate rise in order to prop up the currency. With those kind of expectations riding high, the Bank of England then came out with this statement in the afternoon basically saying, no, we’re not gonna do anything until our next meeting in November. We’ll change interest rates then, but until then, we’re staying put. And so I suppose that frustrated some of those expectations in the market. We saw the pound go back down again, having recovered all its losses on the day to trade kind of a little bit more than one and a half per cent lower on the day. So we’re not back at all-time low territory, but even without the early plunge, we would still be looking at a big fall on top of the fall we already saw on Friday. And the, you know, the lowest level since the 1980s.

Marc Filippino
OK. So then what’s next, Tommy? It seems like there’s a very little, that can calm markets right now.

Tommy Stubbington
The key thing now will be to see the markets settle at these levels or do we see more, more selling from here on in? You know, I don’t think anybody in government or the Bank of England will be particularly thrilled with the levels that the pound is now trading at. But at least if we don’t see further declines, then that would, you know, help to forestall the sort of sense of crisis that people were talking about early on Monday. But I think it is quite possible that we do see further moves and the pressure ratcheting up again on the authorities, both in terms of the Bank of England and the chancellor, to tell us more.

Marc Filippino
Tommy Stubbington is a capital markets correspondent for the FT.

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Elon Musk’s satellite company, Starlink, is trying to provide broadband internet in Iran. This comes after the government cut access to Instagram and WhatsApp. Iranian authorities are trying to stop protesters from communicating. Demonstrations ramped up last week after a young woman was killed in police custody. She was allegedly violating the country’s Islamic dress code. Now, the US government has loosened sanctions to allow companies like Starlink to activate their service in Iran.

Felicia Schwartz
So basically it is this new generation of satellite networks.

Marc Filippino
That’s the FT’s Felicia Schwartz.

Felicia Schwartz
Basically, it’s designed to provide high-bandwidth internet connection from space to individual users. But the way it works is you need a special terminal physically to receive a signal from its constellation of satellites.

Marc Filippino
Felicia says activating Starlink probably won’t have a big impact because you need a terminal to connect.

Felicia Schwartz
So basically, Elon Musk told my colleagues when he spoke to them last week that he doesn’t really expect that the Iranian government will approve this and that, you know, someone will need to try to smuggle this in if it’s gonna work. So I don’t think he or the US government has any expectation that this would make it in, in like huge quantities. But if anyone is able to do it, maybe at least some people would have service.

Marc Filippino
The loosened sanctions will impact a large range of American tech companies, not just Starlink.

Felicia Schwartz
So basically what the US did was they took a hard look at the sanctions they had on the books and tried to, like, alleviate barriers to make it clear that if someone in Iran wants to connect to a VPN or perhaps like buy a professional Skype subscription or use something like ProtonMail which charges a fee, like all these like secure ways of communicating that the US was basically doing what it could on its side to make it clear to companies that that business is allowed and that they want US companies to be providing internet access and services to ordinary citizens in Iran. And keeping people connected, keeping people online, showing the world what’s happening, that’s a huge priority of the American government to try to promote the free flow of information and to shine a light on what’s happening in Iran.

Marc Filippino
That’s the FT’s foreign affairs and defence correspondent, Felicia Schwartz.

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You can read more on all of these stories at FT.com. This has been your daily FT News Briefing. Make sure you check back tomorrow for the latest business news.

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