- Italy: Once more at the forefront of economic and cultural development - October 24, 2018
- The Exchange Rate Issue - April 15, 2018
- How hot can we get? We are in Europe after all, right? - March 27, 2018
- Fish in Troubled Waters - January 21, 2018
- The Dutch Coalition Agreement, Concisely - November 14, 2017
- This Old Guitar Gently Weeps - October 8, 2017
Where once the Romans paved the way for modern Western European civilization, the Five-Star Movement and the Lega Nord are now paving the way for a new era of European civilization, one where government budgets are fairy tales and the world is made of candy-canes – we are nearing Halloween of course. In an attempt to trick-or-treat their own citizens they announce fiscal candy for everyone – ranging from a basic income for the unemployed to a tax decrease for reinvesting firms and everything in between. However, the dentist in charge of the clean-up, the European Commission, has vowed to be the responsible parent it always is and told the tantrum-throwing Italy to go to bed and think it over for a night, with Deputy Prime Minister Matteo Salvini going to bed on naught more than a promise ‘not to subtract a single Euro from the budget’ (Boffey, 2018). Alea Iacta Est.
All cynicism aside, this is the newest development in an Italian mudslinging contest to get itself as close to an Italexit as it may possibly go. It could also seriously hurt either Italian financial autonomy or the credibility of the European Commision as an authoritative and trustworthy legislative and judicial institution. The rejection of the proposed Italian government budget will feed the populist rhetoric that Lega Nord and the Five-Star Movement have quickly become world famous for. It could also become an inspiration for populist parties around Europe. However, this all depends on the Italian reaction to the European Commission’s rejection and the credibility of the Italian threat.
If Italy manages to convince the European Commission to even remotely let them any leeway, this phenomenon will simply spread like wildfire. Prime candidates for trick-and-treating would be other populist-run countries such as Hungary and Poland. The European Commission knows that it will have to be stringent and force Italy to accept cuts to its budget.
The Italian threat relies mostly on the possibility of an Italexit, however, I personally do not see an Italexit as even remotely likely, as they were both one of the countries who helped draft the Treaty of Rome and are one of the countries most invested and dependent on the European Union. The Italian economy is also one of the most heavily subsidized by the European Union, especially concerning agriculture. It is a country at the heartland of the EU, which does lend the threat more credibility, as the trade between Italy and other EU-countries is one of the most bilateral in the EU. Italy can also boast a positive trade balance, however, as many EU-countries they are severely dependent on imports for several key sectors: refined petroleum, crude oil and mineral products.
To conclude, I would consider the Italexit threat near negligible and am quite curious what amendments the Italian government will propose to mend its government budget.