Change is afoot in the EU. But for better or worse?

Future historians may well see immigration as the start of the EU’s collapse. Merkel has been so flaky on the refugee crisis, Cadburys could have wrapped her up and sold her. But before collapse there could be a big new push from Italy and the south

Merkel_and_renzi
Angela Merkel and Metteo Renzi
Timwork
Tim Hedges
On 8 May 2016 13:57

To football fans and at least one BBC commentator having difficulty pronouncing Ranieri, I can offer the consolation that it is nothing like the problems the Italians are having with Leicester. La Repubblica newspaper even published an article on how to say it.

At this sensitive time, Remainers may feel that an Italian manager (the Italian for which is Il Mister, by the way) winning the English Premiership was a story of European harmony. Unfortunately harmony is not a quality currently recognisable in Euro politics.

The Italians, as I have written before, are getting fed up. And it is not just the low growth caused by an overvalued currency or the constraints of the regulatory system which are threatening the European ideal. Future historians may well see immigration as the start of the EU’s collapse.

Italy’s recent proposal, that the refugee problem should be financed by a Eurobond, was of course shot down. The Bundesbank, curiously powerful despite the existence of a European Central Bank, continues to show its extreme Calvinist leanings. Anything involving joint borrowings was never going to get past even the suburbs of Frankfurt.

And yet the idea had merit. It was not money to rescue failing eurozone economies, but investment in other countries whose brightest and best are emigrating. This is something Italy knows about.

And, of course, the Italian proposal carried with it the assumption that the refugee crisis is a European one, which Mrs Merkel doesn’t want to hear. Germany has contrived at closing the Balkan route, so what are the refugees supposed to do but go through Italy? They are hardly likely to sail past Gibraltar and up the coast of France to enter Germany by the North Sea.

Because the Germans know, as the Italians and Bulgarians and Serbs know, that the refugees aren’t heading for the Catholic and Orthodox south, the indebted, jobless south. They aim for the prosperous, protestant north, of Germany, Britain, Holland and Sweden. Italy is just a rite of passage, not a destination. Unless you are Angela Merkel.

It seems only recently Chancellor Merkel was opening borders, making patronising speeches about humanitarian responsibility. Now she connives at anything, such as the shoddy, now failing Turkish deal, which will save her face. Merkel has been so flaky on the refugee crisis, Cadburys could have wrapped her up and sold her.

Finally, however, some modest progress may have been made. Mrs Merkel has travelled to Italy and publicly endorsed a second Italian plan to invest in some African nations from which refugees are most likely to come. She seems to be saying there was no need for the joint borrowing in that there is enough money lying around unspent in Europe. One would have thought that in itself was cause for concern.

This climbdown by Merkel seems to represent a small diplomatic triumph for Italy. Could it be the start of something, a change in Europe?

Those who hope for a political equilibrium in the EU have traditionally assumed that France would be the leader of the non-Germanic front. But President Hollande has been too weak, and his position ahead of next year’s elections is precarious.

Now Italy, the Eurozone’s third largest economy, has a strong, confident leader. Can it marshall the south to build a force within Europe? Will the Germans let it?

Anatole Kaletsky, writing for Project Syndicate, talks of a second Italian renaissance. He refers to the three most prominent Italians (after Ranieri, presumably). The first is Mario Draghi of the ECB who, in the teeth of Bundesbank opposition, has forced through some sort of expansionist measures to save Europe.

The second is Pier Carlo Padoan, finance minister, who has fought against the Brussels-Berlin orthodoxy and issued a probably illegal tax reducing budget.

Then there is the dynamic young Prime Minister Matteo Renzi who has brought in structural and political reforms to give Italy a chance, no more than that, perhaps, of succeeding.

Italy’s weakness has traditionally been its economy. In Europe it has been politically shy, as if it knew it might let its friends down. With a couple more quarters of growth and a resolution to its banking crisis (of which more next time) that may change.

But Italy and any followers it gathers will be monetarily expansionist and politically integrationist. Don’t let the Remain camp tell you it is better the devil you know. Change is afoot in Europe, and in future it may be a very different club to the German led one we are used to.

Tim Hedges, The Commentator's Italy Correspondent, had a career in corporate finance before moving to Rome where he works as a freelancewriter, novelist, and farmer. You can read more of his articles about Italy here

 

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