Trouble brews for Brussels with Italy's new government

The new Italian government is highly critical of EU interference in Italy’s affairs so there will be trouble. They are also about to increase public debt by at least €100 billion. It's going to be fun and games for the crisis ridden EU

Conte
Giuseppe Conte (right), Prime Minister of Italy
Timwork
Tim Hedges
On 23 May 2018 11:06

Habemus Papam!’ calls out a senior cardinal as the white smoke rises from the Sistine Chapel; ‘we have a pope.’ The crowds wait in awe to see what sort of creature they have got.

Many will have been feeling the same mixture of curiosity and relief when they learned that Italy finally has a government, ten weeks after the election.

And just as the crowds have no idea what the new pope is going to be like, there is little to tell them now how the government will be. It seems to be composed of two diametric opposites. We now know the name of the new Prime Minister, but no one has ever heard of him. Giuseppe Conte? Not the Chelsea manager, surely?

In fact Giuseppe, a native of Puglia, is a professor both at Florence University and at LUISS in Milan, where I once escaped with my life after delivering a talk critical of the EU. He is going to be hearing plenty of that stuff now.

We have some clues, though, as to policies. In particular the lengthy coalition document signed by Di Maio for 5 Star and Salvini for La Lega which outlines their agreement. Full credit to the two for being open; normally parties prefer to keep the gruesome bits secret.

Earlier, a draft of this document was leaked, and it was enough to make members of the Bundesbank splutter into their weissbier. The two young leaders proposed that the holdings of Italian bonds at the European Central Bank, by dint of the quantitative easing, should be cancelled. Not to worry. It’s only €250 billion.

After the spluttering, the retraction was even worse. They said it was only an accounting change, and they were going to treat them the same way the British do. The difference is that the Bank of England doesn’t have a problem saying it had acted to benefit the British economy -- it is what we are paying them for.

But to suggest the ECB might have helped Italy’s economy (and not the others) is a heresy beyond heresy in Germany -- they would have to consult those old guys in Karlsruehe with the red hats.

This is how the new government is going to be: they are frank to the point of brazenness, and rather like to flaunt their independence of thought. It is going to go down badly in Brussels, where a grey uniformity is preferred, with regular eulogising of Ever Closer Union.

Apart from a bizarre dispute about a high speed rail link to France, the final draft contains three points: a form of unemployment benefit set at €780 a month; a two stage regime of lower income taxes; and deporting more than half a million illegals. Matteo Salvini will oversee this from the Viminale, or Home Office.

The initial effects of the government will be twofold: they are highly critical of EU interference in Italy’s affairs so there will be trouble. Second, they are about to increase public debt by at least €100 billion causing interference (see trouble, above). Indeed the French Finance Minister has already been critical, though it’s hard to know how he kept a straight face given that France has scarcely ever been within the budget guidelines.

Oh, and Salvini and Di Maio want a rapprochement with Putin.

What could possibly go wrong?

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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