Italy vs the EU (again)
By Alberto Mingardi
Italy is in a stalemate with the European Commission on its budget law, with the new “populist” government trying to twist the arm of the Commission. Yet the two parties that support the government, the Northern League and the Five Stars Movement, seem to be thinking mostly in terms of the upcoming (May 2019) European elections. They want to increase their consensus as defenders of national sovereignty against the all powerful Brussels. On Politico I try to explain why I find this to be a bizarre blend of nationalism: one that tries to commandeer to other nations’ purses, instead of building national confidence up.
A few days ago Luigi Zingales had an op-ed in the New York Times in which he argued for an armed truce so to say, between Rome and Brussels. In his piece, he reminds us that “one of the lessons we learned from 1930s Germany is what happens when an intransigent group of nations tries to humiliate a prostrated borrower country for petty national politics”. These are wise words: yet one wonders how they do apply to today’s Europe.
Since 2016, the ECB has so far bought 2.5 trillion euros worth of the debt of member countries’ debt. When it comes to Italy—as a consequence of its bond-buying programme—the ECB now owns 18% of Italy’s government debt on its balance sheet. By doing this and more generally by resorting to non conventional monetary policies, the European Central Bank has helped to keep the cost of financing the Italian debt low, certainly lower than it would have otherwise been.
On the other hand Zingales points out that most of Italy’s problems are of her own making. When it comes to reforms to foster growth, reduce government spending, open markets up, Italy did very little since 2016. Yet its new government desires no reforms of this kind and its ministers day-dream of new nationalisations.