EU’S attitude is a boost for Italy’s populists
On March 25 2017, leaders from 27 EU members assembled inside the Palazzo dei Conservatori where, on the same day in 1957, the Treaty of Rome had been signed.
As they listened to each other’s collegiate speeches, celebrating the EU’S 60th anniversary, two distinct groups of demonstrators had gathered on the streets of the Italian capital.
Just outside the Palazzo, the officially backed “March for Europe” could be heard cheering. Several thousand EU supporters, many of them excited youngsters carrying centrallyissued yellow and blue placards, held an upbeat rally.
Across the city, rather different demonstrations were happening, involving many thousands more. Amid tight security, including a huge deployment of Italy’s tough anti-riot police, a much noisier rally protested bitterly against the EU. Hemmed in by armoured vehicles, these demonstrators – generally middleaged and more careworn – marched under various Right- and Left-wing banners, shouting their disaffection.
They decried Brussels-based technocrats and corporate vested interests. They complained that the single currency has benefited prosperous nations like Germany, while impoverishing the likes of Italy and Greece. They derided the EU as a “rich man’s club”, with “the banks always getting saved by the European Central Bank”, while there was “never any money for the people”. There was no hint of celebration – just smoke bombs and barely controlled rage.
These two opposing sets of demonstrators in Rome – and several other European capitals on March 25 2017 – illustrate the EU’S quandary. Brussels wants “more Europe” and “ever closer union” – but their project has little popular support. The EU has instead become the focus of massive popular discontent, particularly since the global financial crisis. That’s largely because the centre piece of the “European Project” – the single currency – has, for many millions, been an unmitigated disaster.
By binding members across the south of the EU into a high-currency straitjacket, the euro has crushed their competitiveness. Unemployment in Italy, while officially high at 11pc (compared to 4.3pc in the UK), is dismissed as a gross under-estimate. Youth unemployment is around 40pc, even on the government’s numbers – a human tragedy. Italy has not only failed to recover since the 2007 financial collapse, but has barely grown since the euro’s launch in 1999.
These realities explain, of course, the popularity of upstart populist parties such as the Eurosceptic Five Star Movement and the anti-immigration League party. Their recent electoral success – and proposed coalition government – spooked the EU establishment so much that democracy was yet again usurped in the name of “European unity”.
Last weekend, Sergio Mattarella, the Italian president, vetoed the appointment of veteran Eurosceptic Paolo Savona as the country’s finance minister. In response, financial markets took umbrage, with shortterm Italian bond prices suffering their biggest one-day fall in a quarter of a century, fuelling a broader sell-off in Italian assets reminiscent of the 2012 eurozone debt crisis. At an auction of six-month debt, the Rome government had to pay investors the highest yield for over five years.
Mattarella had appointed Carlo Cottarelli, a former International Monetary Fund official as interim prime minister, with the task of planning for new elections and passing a Brussels-approved low-spending budget – the precise opposite of what the Italian electorate recently chose.
“This is the darkest moment in the history of Italian democracy,” warned, Luigi Di Maio, leader of Five Star, as he called for mass protests. “Italy is not a colony, we are not slaves of the Germans and the French,” raged Matteo Salvini, head of the League.
This was the first time such presidential powers had been used to block the formation of a new Italian government. Far from solving this crisis, that plays straight into the hands of those arguing that Europe has too much influence over Italian politics. The markets agreed, concluding such tactics will ultimately deliver an even stronger mandate for anti-establishment, Eurosceptic parties, casting further doubt on the Italy’s credit worthiness and its future in the euro zone.
At the time of writing, having dropped the idea of Savona as finance minister, Italy’s populist coalition has just been given the green light to form a government. Instead of Cottarelli, the prime minister will be Giuseppe Conte, a little-known law professor. But Savona, who has described Italy’s euro membership as a “historic error” and “a German cage”, will remain influential, and could yet be given another berth in the Italian cabinet.
Financial markets remain rightly nervous. Rich nations such as Germany and the Netherlands have benefited hugely from single currency membership. Yet there is no appetite among their voters to subsidise poorer neighbours such as Italy.
Economic stagnation and unemployment has pushed Italy’s public debts way above 130pc of national income. With a banking sector awash in non-performing loans, the country is at grave risk of a default. But as the Eurozone’s third-largest economy, with GDP around ten times that of Greece, an Italian bail-out may well be impossibly expensive.
The temporary appointment of the technocrat Cottarelli, and the broader political stitch-up, is the embodiment of what the Italian electorate just rejected. With the latest deal subject to a Parliamentary vote of confidence, fresh elections cannot be far away. Any new campaign will be fought entirely on the theme of “The People versus the Palazzo”. And the Palazzo is likely to lose.
‘Italy is not a colony, we are not slaves of the Germans and the French’
Giuseppe Conte, the new prime minister of Italy, with president Sergio Mattarella, who vetoed the choice for finance minister, the Eurosceptic Paolo Savona