Giorgia Meloni and her Brothers of Italy party emerged as the clear winners in the September 25 elections, putting her on course to form a new coalition at a fraught time for the country’s economy.

With a splintered opposition, analysts predict she could stay the course longer than many of Italy’s notoriously short-lived administrations. But it likely won’t be an easy ride. Here are the seven major challenges she will face.

Economic headwinds

Meloni takes power at a time when Italy’s economy is slowing down. Growth forecasts have been cut to 0.6% for next year, due to raised energy costs, making it harder to manage high public debt of 145.4 percent of GDP. Meloni must also manage surging inflation and rising interest rates.

She has promised to cut taxes to stimulate economic growth but raising the deficit levels above the previous targets could create serious problems. “If Meloni strays from the trajectory set by Draghi, the government will face a very negative reaction from financial markets,” said economist Guido Tabellini, a professor at Bocconi University in Milan.

The budget

Top of Meloni’s in-tray will be the 2023 budget. When the new government takes office, probably in early November, they will need to send a draft budget to Brussels for approval within weeks, but room for maneuver is limited. Meloni needs to find billions of euros to renew temporary measures to cushion the effects of energy price hikes and inflation, which will impact on her ability to deliver on her allies’ election promises, such as blocking a rise in the retirement age. That could cause tensions in the coalition.

The recovery plan

Italy needs cash from Brussels. The new government has until December to meet 55 milestones and targets set by the European Commission in order to secure the next tranche of funding from the EU’s €750 billion post-pandemic economic recovery plan. Her predecessor Mario Draghi’s ministers have accelerated in advance of the handover, but lack of project management expertise at local level, and rising material costs, could mean Italy fails to make good use of the funds.

Meloni triggered alarm during the campaign when she said she wanted to renegotiate the recovery plan. Her opponents argued this could risk vital funds while even her coalition partner Silvio Berlusconi called the proposal “illogical and dangerous.” Meloni backtracked, but still raised the need for “a review” given increased raw material costs. Her manifesto called for the deal to be adjusted to address the energy crisis, as few resources are allocated to this sector. “If we really risk losing the money, of course nobody wants to lose it,” she said. “But I don’t think the European Commission is so unreasonable.”

Her allies

Having trounced her allies, including the League in its northern heartlands, Meloni now has the difficult task of working with the people whose lunch she just stole. The coalition partners have diverging positions on numerous issues including regional autonomy and pensions. Meloni pledged to abolish welfare for the unemployed. Her allies want to remodel it. On immigration, she called for migrants to be blocked in Africa, while Matteo Salvini wants to bring back his security decrees which cut humanitarian protection programs.

Matteo Salvini, leader of the League, wants to return to the role of Interior Minister

The Cabinet

Meloni plans to stack her cabinet with civil society experts, and recruited some potential candidates, such as prosecutor Carlo Nordio, before the election. But she will be under pressure from coalition allies, who expect key ministry positions in exchange for their support. Salvini, leader of the League, wants to return to the role of Interior Minister, where he can build support with his anti-immigrant agenda. But as he currently is on trial for holding immigrants offshore while in that role, President Sergio Mattarella, is unlikely to approve.

Berlusconi also is aiming for an important role for his center-right party in the government, claiming they are the guarantor of Italy’s pro-European line. The war in Ukraine complicates Meloni’s decision as she will want to avoid appointing Russophile ministers. Leaving Salvini out of the Cabinet would give him more space to attack the government.

Sanctions unity

Meloni has pledged to remain aligned with NATO and the EU on sanctions against Russia and told Ukrainian President Volodymyr Zelenskyy that he could count on her support. But Salvini claims sanctions hurt Italy more than Russia, and opinion polls suggest voters are on his side. If further sanctions packages are seen as onerous for Italians, Salvini could create difficulties, particularly as he attempts to regain support.

Europe

Brussels is always a potential minefield. While the leaders of Hungary and Poland, who are under EU scrutiny for backsliding on democracy, welcomed Meloni’s success, Paris and Berlin are much less enthusiastic. During the campaign Meloni said that, for the EU, “the party is over,” as Italy will defend its interests in Europe more robustly. Germany’s ruling social democrats endorsed Meloni’s adversary, Democratic leader Enrico Letta.

French President Emmanuel Macron had close relations with Draghi — the pair signed a strategic alliance last year. Diplomats say that, although Meloni and Macron don’t share the same values, the French leader will want good relations with Rome because of their shared interest in reforming EU fiscal rules. Brothers of Italy MEP Nicola Procaccini told POLITICO: “What is important is that Italy plays its game.”