Italy's Meloni marks three years in power, embracing stability over growth

Three years after winning power, Giorgia Meloni has consolidated her position at the helm of Italian politics, defying the economic headwinds and international uncertainty that have unsettled many of her European counterparts.

In a country long marked by instability, Meloni's steady leadership has won her plaudits in the markets, but analysts say she has cemented her position by embracing the status quo rather than tackling the hard-hitting reforms that Italy badly needs.

Recent polling shows that both her Brothers of Italy party and her broader conservative coalition command more support now than they did at the time of their 2022 election victory — a rare trajectory of rising consensus for a sitting government.

Her own approval rating hovers around 42% — a figure that places her well ahead of many European peers, including German Chancellor Friedrich Merz and French President Emmanuel Macron.

This abiding popularity reflects a broader perception of competence and control, underpinned by a strong presence on the international stage and a cautious approach to public spending that has reassured investors, analysts say.

"Meloni has managed Italy's budget constraints, but we are not seeing any transformational structural change," said Wolfango Piccoli of the London-based political risk consultancy Teneo. "Even with a strong parliamentary majority and very weak opposition, we are seeing a complete lack of ambition."

RISK AVERSE GOVERNANCE

From the outside, Meloni's Italy appears to be a prosperous island of certainty in a turbulent Europe. 

Last month, Italy's 10-year borrowing rates fell to match those of France for the first time, reflecting a dramatic drop in the public deficit from 8.1% of gross domestic product  in 2022 to a forecast 3.0% this year. 

Ratings agency Fitch rewarded Italy's fiscal prudence by upgrading Italy's closely watched credit rating. By contrast, France, with a 5.4% deficit forecast for 2025, saw its rating downgraded. Meloni welcomed Italy's upgrade as "confirmation that the path of my government is the right one". 

But while her risk-averse governance has contained the deficit, it has done little to unshackle the hidebound economy, long afflicted by red tape, high energy costs, demographic decline, a persistent brain drain, high taxes and low wages.

Instead, Meloni has shored up her right-wing base by championing national identity and traditional family values. She has also focused much attention on law and order, looking to shake up the judiciary and boost police powers.

This has done little to help the economy, with Italy's industrial production falling some 7.5% over the past three years, according to national statistics office ISTAT.

Italy's GDP is forecast to grow just 0.5% in 2025 and 0.8% in 2026, according to the IMF, against 1.2% and 1.1% for the euro zone as a whole.

EU FUNDS PROP UP LACKLUSTRE ECONOMY

Without the support of the European Union's post-pandemic recovery fund—the National Recovery and Resilience Plan, Italy might have slipped into recession, economists say.

The NRRP, worth 194 billion euros ($226.24 billion) in grants and loans, has been a lifeline for Meloni's government. 

"The only growth we have is mainly thanks to the NRRP. Without it, we would be in recession," said Carlo Calenda, a former industry minister and head of the centrist Action party.

"The main problem is how we have spent the NRRP funds. Whereas Spain used their money to incentivise businesses and attract investments, we distributed money indiscriminately to municipalities, much of it on totally useless projects."

Underscoring the different approach, the IMF has forecast that Spain's economy will grow 2.9% this year and 2.0% next.

The government denies squandering the EU cash, saying lots of the money had gone into strategic projects, like upgrading transport links, whose benefit would be felt in the years ahead.

OLD ELECTORATE RESISTANT TO CHANGE

Since taking office in 2022, Meloni has established herself as a key player in European and transatlantic affairs, joining forces with European Commission President Ursula von der Leyen to slow migration flows from North Africa and forging close ties with both President Donald Trump and his predecessor Joe Biden.

Pollster Lorenzo Pregliasco said her sure-footed foreign endeavours and aversion to political drama at home have helped her maintain a steady standing in the polls.

Just as importantly, the centre-left opposition camp remains deeply divided after its 2022 defeat, with no leader so far capable of challenging Meloni, whose feisty, no-nonsense language resonates with an electorate wary of political elites.

"She's not loved by a majority of Italians, but there is no obvious alternative to her at present," Pregliasco said. 

"She also knows that if you try to reform something, you inevitably make somebody unhappy. She's not probably doing much, especially on the domestic level, for that very reason."

Resistance to change is perhaps understandable in a country that has one of the oldest demographics in the world and where a quarter of the population is aged 65 and over.

However, just because Meloni has been able to navigate her first three years with relative ease does not mean that she faces plain sailing over the next two years before the next national elections set for 2027.

The NRRP funds are meant to dry up in 2026 and U.S. tariffs will put additional strain on Italy's export-led economy.

"My baseline scenario is that Meloni will likely complete this legislature and will likely be the favorite to win the next election," said Pregliasco. "But, this is Italy and it doesn't take much for the winds to change."

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