Italy and the EU found themselves at loggerheads again as the Commission slammed the political and economic program of the Rome government. Measures adopted in the country are not considered capable to relaunch growth and jobs, and address the new challenges in a generally deteriorating economic environment. The executive body of the European Union puts very seriously in question the current ruling majority in Rome, in a purely political judgment contained in a document that highlights the contrast between two visions of Europe: the one of rigid rules and the one of the need to reform rules.
The winter economic forecasts released last week (7 February) showed that Italy is expected to basically have no growth in 2019 (0.2% of GDP). The report clearly outlined the responsibility of the ruling political parties for the negative developments, and suggested that the country can be a source of major problems for the euro area, due to spillover effects that cannot to excluded.
“The recent slackening of economic activity is more attributable to sluggish domestic demand, particularly investment, as uncertainty related to the government’s policy stance and rising financing costs took its toll”, the report said.
In other words, if investors escaped away from Italy it is because of Italy, it is not because of Europe. The point now is: will the Italian decision makers listen to this warning? The answer is no.
Electoral campaign will be about confrontation
The League and the Five Stars Movement (M5S), the two political parties in power, have always acted in open confrontation with the EU and the decisions taken at European level. Both parties labeled the people working in Brussels as ‘non-elected bureaucrats’, in a clear sign of disrespect for the European ommission. The latter issued a political judgment over policy taken by a sovereign country, and this is something that both parties will use during their electoral campaign for the European elections.
No doubts that anti-European narrative will be at the core of all declarations and statements to be released from now on by Lega and M5S. The Italian government cannot publicly recognize to be mistaken, and will try to defend its reasons. How feasible is it? Despite national slogans, the situation appears to be less positive than what is said.
Citizenship income scheme doesn’t work
A clear example of that is citizenship income scheme, one of the main political promises by which M5S made their fortune in the last general elections, in March 2018.
“Private consumption is set to underpin GDP growth, helped by a rise in real disposable income due to lower oil prices and marginally supported by the introduction of the citizenship income scheme”, according to economic forecasts.
The fact that one of the main measures tabled to revitalize the internal labor market and the home consumptions is expected to only “marginally” helps the country, is an alarm bell for the EU Commission. But on the other hand, it is something M5S cannot accept.
“We are confident the Italian new budget will have a positive effect on the economy”, M5S MEP Ignazo Corrao said in an interview with CNBC commenting the EU Commission assessments. “The budget law will enter into force from the next month and the results will be clear at the end of the year”.
Corrao is sure that between Rome and Brussels the latter has it wrong. “The recipes suggested by the European Commission, like the austerity measures, have failed”.
This argumentation is not 100% true, as already explained on this blog. But the problem here is the open confrontation between Italy on one side and Europe on the other side. Such an opposition is here to stay, at least until the vote of next May.
Meanwhile the Italian vice prime minister and M5S leader, Luigi Di Maio, announced the activation of the web portal to apply for the citizenship income scheme. There is still uncertainty about how it will work in practice, but that’s another story. What really matters for the Movement is to have something to offer to voters, in order to show them that M5S are keeping their promises, despite the critics from the opposition parties and from the EU.
‘They want to stop the change’ is by now the refrain for replying to any critic on what Italy is doing (or trying to do). This slogan won’t change. Is the citizenship income scheme marginally fruitful? According to the Italian government it is impossible, it is just a fake news from an EU Commissioner, Pierre Moscovici, seen as “not credible” because just “interested in his political future”.
Given the situation, dialogue is impossible. All that remains is the clash.