Brussels sends a Trojan Horse to Italy

Ms von der Leyen’s rescue package is a Trojan Horse and, to paraphrase Virgil, we should beware Brussels bearing gifts.

Brussels is at it again
Tim Hedges
On 25 June 2020 11:05

The Estates General were one of the most exciting times in Europe: in 1789 a beleaguered Louis XVI summoned a vast assembly of commoners, aristocracy and clergy (the three estates) to agree on a future.

The Commoners rather overturned the beauty of the compromise by forming their own assembly, inviting the other Estates to join, and when they didn’t, starting the July revolution.

Cut to Italy in 2020 and less exciting times (albeit fairly desperate. A beleaguered Giuseppe Conte has convocated an Estates General to get him out of the Covid-mess, the taxes-mess, the productivity-mess and every other little problem. Among the invitees are Ursula von der Leyen and Christine Lagarde: it is essentially a begging exercise.

Opposition leader Matteo Salvini has refused to attend on the grounds that what Italy needs is jobs, not handouts. True, of course, but it fails to get us further forward.

Conte has had a fairly good Corona crisis so far and is popular, because in these times the people like someone non-confrontational. He recently denied in an interview that he was going to set up his own political party to capitalise on his popularity. He may regret that because his government, formed of the 5-Star Movement and propped up by the centre-left Democratic Party, is crumbling underneath him. 5-Star, already in decline, have been accused of receiving money from Venezuela, which is about as low as you can get.

The real reason the opposition Right and Centre Right are staying out of this is that they want to criticise it when it is done. And it is likely to be something of an open goal.

Many in Italy believed that when this unexpected disaster struck an already weak economy (remember there has been no growth since Italy joined the euro twenty years ago) that the other nations would see that Italy had been hit earliest and hardest and chip in to help. We are, after all, one big happy family in Europe, no?

Just imagine the surprise of these Euro-Romantics when the finance minister of the Netherlands said he felt other nations (we know who he meant) should have been more sensible and put some money aside against a rainy day. And then the German Constitutional Court said that any kind of help was pretty well illegal.

However, Ursula von der Leyen wants to keep the EU together and has proposed a rescue plan of €750 billion in gifts and loans, which is a large amount by anyone’s standards. Good news for Mr. Conte? No, it is where his problems start. The handouts come with conditions.

Ms von der Leyen proposes that she have ‘common resources’ (EU money of its own) and that she can use the money to create a ‘deeper and more digital single market’, for example. Now you may remember the Lisbon Agenda of twenty years ago, where the EU was going to be ‘the most competitive and dynamic knowledge based economy in the world’ by 2010. Of course it achieved none of its objectives. It didn’t work then and it won’t work now: it is just words.

Next, competition policy is going to be tweaked to enable big mergers, to compete with American and Chinese companies. You will recall this is the programme of President Macron. Italy’s biggest company, FIAT, is already being dissolved into Peugeot Citroen.

The base from which the loans and handouts will be serviced is a new tax which they refuse to tell you about yet. It will be on multinationals which benefit from the single market. It is clear that once they have got a tax base established they can expand it to cover all corporates. They are aiming for a common corporate tax rate, to stop countries undercutting the overly high rates in France and Germany.

More taxes for Brussels, more power to control European industry, less freedom of economic action, high corporate tax rates. These things aren’t going to help Italy at all.

Italy needs lower taxes, less bureaucracy, improved education, less organised crime, a streamlined legal service. Ms von der Leyen’s rescue package is a Trojan Horse and, to paraphrase Virgil, we should beware Brussels bearing gifts.

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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