At the start of a year in which she will face her first real test of popular opinion at the European Parliament elections in June, Giorgia Meloni will be hoping for some cheer from growth figures out next week. She is unlikely to get any. The last reckoning showed the economy had grown by a bare 0.1% in the 12 months since Italy’s hard-right prime minister took office in October 2022. Nicola Nobile of Oxford Economics, a forecasting group, says quarter-on-quarter growth in the last three months of 2023 may even have turned negative.

No blame has so far attached to Ms Meloni’s stewardship. Nor should it yet. The economy was hit badly by the pandemic, and its recovery seemed sure to peter out. More recently it has faced new difficulties, notably from the energy crisis caused by Russia’s invasion of Ukraine. But the lack of growth is one of two clouds in an otherwise largely clear sky. The second is a surge in the irregular immigration that Ms Meloni’s right-wing coalition is bent on curbing. The number of arrivals from the Mediterranean rose to almost 160,000 last year, a 50% increase on 2022 and the highest figure since the peak year of 2016. The government is hoping to divert some boats to holding centres in Albania. But the plan has run into legal challenges there.

Otherwise Ms Meloni is “increasingly in command of the scene”, says Lorenzo Castellani, who teaches politics at LUISS, a university in Rome. Her coalition has a comfortable majority and remains united, despite squabbles. Recent polls give the prime minister’s Brothers of Italy (FdI) party almost 29%, compared with only 9% for the Northern League led by Matteo Salvini and 7% for Forza Italia, bereft of its founder, Silvio Berlusconi, who died last June. Efforts by Mr Salvini to claw back support lost to the Brothers by adopting an increasingly hardline stance have not so far given the League better ratings. The opposition is split between the centre-left Democratic Party (PD) and the smaller and populist Five Star Movement. Polls suggest Elly Schlein of the PD is the least popular of Italy’s main party leaders.

Relations with Italy’s NATO allies are good. Italy has given enthusiastic backing, and arms, to Ukraine and rather more muted support to Israel. It has also kept Brussels happy enough for the European Commission to continue providing regular dollops of the €194bn ($211bn) allocated to Italy from the EU’s covid-19 recovery fund—by far the most to any member state. But banking cash is one thing, spending it another. Concern over Italy’s ability to disburse its windfall is growing. An investigation by Openpolis, an NGO in Rome that promotes transparency, shows that only €2.5bn was actually spent in 2023.

The expected stimulus to the economy when the money does eventually hit its mark is a big reason why no Italian debt has been sold off, despite rising interest rates and a deficit that has ballooned since 2019. Another is that the European Central Bank (ECB) made clear in June 2022 that it would not tolerate a much wider spread between Italian interest rates and those of Germany, the bloc’s benchmark. But the ECB, like the commission, expects continued structural reforms in exchange for its support. It is far from clear that Ms Meloni’s government is keen to make them.

One of the biggest obstacles to enterprise—and to foreign direct investment—is the delay businesses encounter in resolving disputes and recovering debts. Marta Cartabia, justice minister in the previous administration of Mario Draghi, introduced procedural changes and a programme of digitisation, and hired some 8,500 junior lawyers as clerks. The time it takes to resolve a civil case has fallen by almost 20%. As a result, the backlog is down by more than a third.

The current government has stuck to those changes, but its own contribution to speeding up not only the courts but also the use of the EU’s largesse is controversial. A bill before parliament would abolish the crime of abuse of office. One of its aims is laudable: to do away with the reluctance of officials to sign off on projects because they fear inadvertently falling foul of the law by, say, awarding a contract to a firm that later turns out to be a mafia front. But in a country permeated by the influence of organised crime, the bill has prompted squeals of protest from lawyers and NGOs. It has drawn criticism from Brussels, too.

Liberalisation of the economy is also problematic. That is nothing new. Every conservative Italian government for the past 30 years has balked at defying the vested interests that would suffer from deregulation. The League in particular has fought tooth and nail to shelter Italy’s small, often family-run, businesses from competition. But in the case of Ms Meloni’s government, there is a new element: her own party is inspired by an economic philosophy that is protectionist, corporatist, statist and critical of free markets.

Ministers have repeatedly intervened, or tried to intervene, in the operation of markets. They have tried to limit surge pricing on some air routes and to slap a windfall tax on the banks’ extra profits from inflation. They also plan to skew corporate governance in a way that would diminish the influence of foreign direct investors. No privatisations are in the offing, though Ms Meloni insisted on January 22nd that the treasury could raise €20bn within three years through part-privatisations that did not endanger state control. Nor has there been any serious move towards realising the state’s vast real-estate assets. All of which poses the question of how the government, which passed an expansionary budget for 2024, intends to reduce—or at least contain—its gross debt stock of around 140% of GDP. This week the OECD warned that Italy would need to cut spending, raise taxes, or both.

Of all the countries in Europe, Italy is for once among those prompting least concern. But its government’s biggest challenges mostly lie in the future. It has to find a way to curb unauthorised immigration if it is to appease its voters, and spend the recovery money faster if it is to satisfy Brussels. Above all, it needs a strategy for growth that goes beyond just throwing EU cash at the economy. “If we cannot lift the growth rate,” warns Francesco Giavazzi, who was Mr Draghi’s economic adviser, “we are in trouble.” ■

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