Salvini may be distasteful, but the EU should not push Italy to the limit
Enter the Forum in Rome and you step back in time. And, like so many politicians, Matteo Salvini wants to time-travel back to an age when European economies grew quickly and the people got richer every year. This week Salvini, the far-right deputy leader of Italy’s ruling coalition, will preside over a rule-busting budget that seems innocuous at first glance – it only proposes a 2% deficit in the coming year – but nonetheless breaks the European Union’s deficit rules.
Brussels will examine the details of the budget over the following two weeks and probably ask for revisions. At this point, unless someone has succeeded in bringing down the political temperature, Salvini and prime minister Giuseppe Conte will probably declare war on Brussels and dare Eurocrats to stop them.
Salvini’s economic problem is that the budget is a cobbled-together wish list masquerading as a coherent boost to productivity, GDP growth and household incomes.
It is a long time since Italy’s economy grew at a pace that brought down its debt-to-GDP level; at 131%, it ranks as the worst EU nation bar Greece. Extra spending has the potential to kickstart the economy, as Salvini expects, but Italians have a habit of mistrusting politicians and their promises. When extra cash comes their way, they save it rather than spend.
More immediately, the ratings agencies are waiting in the wings to downgrade Rome’s debt mountain and make it more costly to service. A downgrade could come only weeks after the EU says no.
Still there is pressure on both sides. Brussels has taken a hard line so far. That looks like inflaming the situation just when tense Brexit negotiations are at their zenith, which seems unwise. Yes, Salvini’s government is distasteful: but it is a duly elected administration and should be listened to.