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Italy And The EU: Brussels Must Start Thinking Outside The Box – Analysis

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What the relations will be between the EU and one of its founding members will unravel in the coming days. It is high time that Brussels starts thinking outside its own box to look for new ways of dialogue with its citizens.

By Stefania Benaglia

On 4 March, Italians were called to vote for the country’s general elections. No party gained sufficient votes to form the government. However, two clear winners emerged: the web-based protest, populist and untested at a national level — 5 Star Movement (M5S from the Italian Movimento 5 Stelle) — and the far-right Northern League, that campaigned on a stridently “Italians First” platform.

After three months of negotiations, and one week charged with unexpected twists, a prime minister has been appointed. Giuseppe Conte, a lawyer and university professor, was previously unknown in the political landscape.

In accordance to the Constitutional procedures, the President of the Italian Republic, Sergio Mattarella, gave Mr. Conte the mandate to form the new government on 23 May. On 26 May, Mr. Conte presented to Mr. Mattarella the list of ministers to form his Cabinet. The president decided to veto Mr. Conte’s proposal because the M5S and the League insisted in having Mr. Paolo Savona — a 81 year-old economist, who holds the key position of Minister of Economy, and is an open critic of the Euro.

The reasons for his veto were well-grounded. Appointment of a controversial figure as Mr. Savona, who, as Minister of Economy — calling for a Plan B to leave the Euro — would have sent the wrong signal to markets and EU institutions. It is a risky move, since the Italian economy that has huge public debt, could have been exposed to speculative attacks. In addition, the possibility of exiting the Euro was not discussed during the electoral campaigns. It is therefore inappropriate to sneak-in from the backdoor, such fundamental issue, without an explicit mandate expressed in the electoral contest.

This institutional crisis created multiple scenarios: President Mattarella chose to appoint a “technical” government — i.e. a government composed by appointed experts without political affiliation, with the only purpose of bridging new elections. The President thereafter mandated Mr. Carlo Cottarelli, a widely-known economist, who has also been previously instructed to rationalise public spending.

Such prospect revitalised the M5S-League coalition and possibly their sense of duty. Faced with the perspective of losing the chance of ruling the country, they agreed on a new list of ministers during which Mr. Savona was moved to the less critical, but still meaningful, Ministry of EU Affairs. Mr. Mattarella, proving once more his respect of Constitutional correctness, gave the mandate to Mr. Conte. The outcome is, however, a rather Jugaad government, given the lack of underlying strategy of the parties that support it — and their history more as “opposition” parties.

Why did M5S and League win? 

Italians voted for those who claimed to represent the voice of ordinary people — the populists. They also voted to oust leaders of the previous governments, no matter that the new leaders seem to be less prepared than the old ones. On paper, the new parliament is made of less skilled and possibly less efficient members.

As in most political campaigns, a number of promises (mostly unrealistic) have been made. The issues that gathered the most support are:

Stricter immigration law

Europe’s migration crisis brought hundreds and thousands of people to the Italian shores. Most came to Europe with a plan to head to northern countries — such as Germany or Sweden — but got stuck in Italy because of EU regulations that state that migrants will have to stay in the country where they are first fingerprinted. Italians are resenting the lack of EU support on this issue. Moreover, the lack of cooperation at the EU level on migration is proving that the absence of a well-planned and structured immigration and integration policy is shaking up its own democracies. Simply “closing borders” is not the answer to such a complex and inevitable challenge, if only for geographical reasons.

In any case, should the Italian government succeed in adopting stricter immigration laws, it will turn Italy into an unattractive country for skilled labour — which, on the contrary is actually needed.

Universal basic income

The promise for universal basic income ensured it a landslide victory in south Italy. It is the poorest part of the country, where unemployment among youth peaks at 50%.

Coalition parties abdicated their efforts to energise the ailing economy. Their plan for fiscal reforms proposed the introduction of a flat tax system and lowering of retirement age. These reforms would prove very expensive for the Italian treasury, and no member of the M5S-League coalition has suggested any credible idea on how to pay for such reforms.

Unfortunately, real challenges remained undealt with: worryingly negative demographic trend (both given by lack of policies supporting families, and by the continuous emigration of young and educated people), approaching the 4.0 economy, and reforming parliamentary system (the latter attempted-reform failed ignominiously, costing millions of votes to the previously ruling, centre-left wing Democratic Party).

New relations between Rome and Brussels? 

A key issue for the new government is its relations with the European Union. It is still too early to tell how this relationship will unfold. The M5S-League coalition agreement doesn’t call for pulling out of either the European Union or the Euro, but it makes a vague call for renegotiating Italy’s ties within the European Union. Proposing policies and putting them into action, however, are two different things. Yet, the new government, may use the threat of unilateral action, such as ignoring EU fiscal rules, to force Brussels to negotiate softer deficit targets. This will be a risky game not only for Italy, but also for Brussels.

What the relations will be between the EU and one of its founding members will unravel in the coming days. It is high time that Brussels starts thinking outside its own box to look for new ways of dialogue with its citizens. Prejudice among European member states — especially along the north-south cleavage — and towards the EU institutions, is undoubtedly growing, and exacerbating differences and fostering opposition in the national public opinion.

Italy is the last EU country where populists and EU-skeptical parties have gained resounding electoral victories. Ahead of the 2019 European Parliament elections, it is crucial that this isn’t taken lightly.


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Observer Research Foundation

Observer Research Foundation

ORF was established on 5 September 1990 as a private, not for profit, ’think tank’ to influence public policy formulation. The Foundation brought together, for the first time, leading Indian economists and policymakers to present An Agenda for Economic Reforms in India. The idea was to help develop a consensus in favour of economic reforms.

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