The Italian trilemma and the reform of the EU

di: Francesco Sisci

Three distinct aspects are coalescing in the controversial new Italian budget law that is sending interests rates for the Italian bonds to almost unprecedented heights.

The first is about the political mettle of the ruling coalition. Are the people of the 5 Star Movement, the main party in the coalition government, and the League, the junior partner, fit or unfit to rule Italy? The question is of fundamental importance to preserve European economic and political balance.

Despite Italian public opinion polls that say their approval rate is sailing at over 60%, European and international opinion sees things differently.

The present rulers should take this into consideration, address the issue, and behave otherwise. They can’t just consider the domestic vote swings, but the vaguer yet very tangible (as it conditions money flows in and out of the country) moves of international perception.

Yet apparently their views are too parochial, and their knowledge too limited to even perceiving what it is happening. They have trouble coping with parts of the Italian press, let alone the ferocious international press. Then they are de facto unfit to tend to the country and thus undermine whatever positive may be done in the present budget law.

Here there is a sub clause. The public row between government partners scares everybody, and shows that certain ministers simply do not know what they are doing. Italy de facto lacks political opposition, and the level of political debate seems so deranged that the theatre of reciprocal accusations and lies spread around is just aimed at boosting TV audience. Yet abroad things look differently. It all projects an image of chaos and thus of a country on the brink of collapse. If someone doesn’t explain otherwise, the situation will be taken at face value.

The second element is at the same time more technical and more philosophical: is the budget law proper and responsive to actual Italian necessities? What can it do to promote growth? Is the promise of free lunch to all unemployed going to boost consumption or depress it? Is building infrastructure effective as a multiplier of development, or is it just a waste of public money? Answers to these questions have to take into consideration the objective conditions of Italy and its society. They are complex problems, which again are barely addressed by the parties in government apparently eager to use the distribution of cash to buy votes in the next elections. This is deeper but it also plays in connection with the Italian decision to force some EU budget constraints.

Then there is a third element, which maybe is the most relevant for the European Union, and it is medium term. The Italian government has posed a crucial question: is this set of EU budget restraints, which focuses only on controlling inflation and relies on growth mainly through increasing productivity and not public investment, stifling the Union?

This recipe is apparently fit for Germany but unfit for other member states. At this point, Germany should “invade” the rest of Europe (and I invited her to do so some years ago) and force it to adapt to German ways. How can this “invasion” take place, now that tanks rolling out of the Alps are out of question? This is difficult, but it could also be a solution of EU and Italian woes.

Another solution is that the EU will have to be reconsidered and rethought. In either case, the argument proves that the Union as it stands cannot work.

The recent vote in Bavaria is also a reflection of this. The richest, safest place in Europe rocked a boat that sailed safely on its route for almost 70 years, failing the CSU, the local dominant power for decades, and the SPD, the former main opposition. This is certainly not a vote against the local government but about the specter of Europe in this union.

The EU is seen as the culprit for the scare over immigration and the “delinquent states” unwilling to follow the common rules. That is: Germany fails to crack down on the Italians and on reforming the EU. This can’t go on.

This at the end is also the problem with Brexit. Britain, possibly the second most important country in Europe, is split in the middle, uncertain about the benefits of the Union. The pros are still unconvincing for many. Both the British parties and voices from Brussels fail to move UK public opinion decidedly in one direction of another.

The problem is that the Union as it stands today doesn’t work. It needs reforming, one way or another, as the Italian government’s present push makes clear. Now the EU and Germany can just wait and see, but the risk is that the difficult German internal consensus may be eroded. Or, with the agreement of the USA, first the midwife and then the Godmother of European Union, they can try to advance a reform agenda, start a dialogue with the rowdy Italians, and shape a new EU that is badly needed.

Confronted with a clear, coordinated US and EU push, the Italians will have to behave or pull out of the Union. The decision would help to clear the situation also for Brexit and the internal German griefs. Short of this the next few months could be extremely unstable.

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