EU playing into the hands of Italy’s hardliners
Italy’s elections took place a good two-and-a-half months ago and yet we still have no government. Travails in forming Italian governments are nothing new, as the fractured party system makes it hard to find alliances and govern with a majority. But, this time around, the situation is even more complex because Italians are set to get the most anti-establishment government in the country’s post-war history.
On March 4, voters handed Paolo Gentiloni’s ruling center-left government a crushing defeat. The big winners were the populists: Matteo Salvini’s League and Luigi di Maio’s Five Star Movement. They are ideologically far apart and yet they are not. The League is very right-wing and anti-immigration — their slogan was “Italians First.” M5S, meanwhile, is an odd amalgamation of left and right-wing ideologies, but is mainly about social justice and helping the underprivileged.
The two parties are now trying to reconcile their differences and accommodate each other’s burning issues. Their attempts to form a government could only start in earnest after the controversial four-time Prime Minister Silvio Berlusconi had announced that he and his Forza Italia party would not veto the formation of a League-M5S tie-up (Di Maio had ruled out working with Berlusconi, with Forza going into the election in a center-right alliance with the League). Berlusconi said that Forza and the League would continue to cooperate on regional and provincial levels, as well as selectively on national issues.
Italy, like Greece, feels that it bears the brunt of the refugee crisis and receives far too little help from the EU.
The League and M5S drafted a document containing key political points to govern their coalition. It accommodated both extremes: The right got very stringent immigration rules and the left got economic concessions such as a flat tax, basic income for the poor and wiping €250 billion ($292 billion) off the national debt.
Italy and Italians used to be enthusiastic members of the EU. However, the refugee crisis saw the country taking in hundreds of thousands of migrants who want to go north, but whom the northern EU countries have shown little willingness to receive. Italy, like Greece, feels that it bears the brunt of the refugee crisis and receives far too little help from the EU.
Italy is also having a hard time overcoming the woes of the 2008 economic crisis. Unemployment is high, particularly youth unemployment, which stands at 32 percent. The country has the highest nominal debt in the EU, amounting to €2.5 trillion. In terms of the debt-to-GDP ratio, it holds second place after Greece. But what happens in Italy is far more important to the EU and the euro than what happened in Greece because it has the eurozone's third largest economy.
No wonder that the above mentioned M5S-League proposals had EU officials and politicians up in arms. It threw the EU/ECB rulebook on debt out of the window, prompting French Finance Minister Bruno Le Maire to admonish any Italian government to respect the EU’s budget rules. It also brought about fears in Germany and other countries that what we will see in Italy will be similar to the right-wing populist governments in Hungary and Poland. In fact, we will probably end up with something similar to the new Austrian government.
The European interventions were not helpful, as they added water to the mills of the populists, who insist that the EU interferes too much in issues of national concern.
By now we should have had a government in place, but there were issues with the academic resume of the desired candidate for prime minister — a politically inexperienced law professor by the name of Giuseppe Conte. He was probably chosen because he was the only candidate the two movements could initially agree on. This says a lot, as both the League and M5S have criticised previous governments for appointing far too many technocrats and not enough elected politicians to government positions. President Sergio Mattarella has so far not endorsed him to head a government and some of Conte’s proposers have now started to wobble.
Theatrics are part and parcel of Italian politics. This time around, all eyes are on how the drama unfolds because there is so much at stake for the country, as well as for the stability of the EU and financial markets.
One cannot emphasize enough how important Italy is to Europe. Any debt crisis in Rome would dwarf what Brussels experienced with Greece. What happens in Italy matters to project Europe and to the euro. In all likelihood, we will not see a new government attempting to leave the euro, but it will stir up trouble.
Another populist government would also embolden the existing ones in Poland, Hungary and Austria, as it would the populist opposition parties in Holland, France, Denmark and Germany, to name just a few.
Therefore it is vital for the future of the EU that its leaders act in a measured way. Hysterics will only strengthen the anti-EU hardliners in the League and M5S. The French have a proverb proclaiming that tone is the making of the music — EU leaders would do well to heed this advice because we need to cool the temperature for the good of all concerned.
- Cornelia Meyer is a business consultant, macroeconomist and energy expert. Twitter: @MeyerResources