Renzi’s risky European grandstanding

Italian attacks on Germany could backfire

Italian Prime Minister Matteo Renzi has been making waves with a series of attacks on European Commission President Jean-Claude Juncker and German Chancellor Angela Merkel. Addressing members of his Democratic party on 6 February, he declared that the days when Rome’s policies could be dictated by ‘a technocracy… who no longer know how to relate to people’ were over. Moreover, it was ‘high time’ Italy was rightfully recognised as the ‘second major player’ in the EU, after Germany and ahead of France.

Renzi has raised the stakes further, seeking support from European socialists and suggesting that the next Commission president should be selected through Europe-wide primaries. This follows his dismissal in January of Stefano Sannino, Italy’s ambassador to the EU and a foremost expert on European affairs, for being ‘too soft’ on Brussels. Sannino’s replacement, Carlo Calenda, is a junior cabinet minister, and the first political appointee in the Italian diplomatic service in 60 years. Renzi has – wrongly – described him as ‘even more quarrelsome than myself’.

The prime minister’s words and actions may be attempts to cover up concern at Italy’s economic problems, as well as deflate a populist opposition at home. A surge in euroscepticism – fuelled by the populist Five Star movement and the (one-time) separatist Northern League – could pose problems for Renzi, who has a less than rock-solid majority with which to pass ambitious reforms and consolidate his grip on Italy’s political system.

At the same time, Renzi is facing a deepening crisis in the Italian banking sector, for which the bail-in measures he laboriously extracted from Brussels may provide only temporary respite. Moreover, he has grudgingly consented to the release of the €3bn the EU agreed to give Turkey to take back unwanted migrants, a decision Rome initially blocked. He maintains that this – as well as other outlays related to the migration crisis – should be excluded from the EU’s fiscal compact.

Domestic support for European integration has come under pressure.  The euro – rather than Italy’s inability to cut through the web of vested interests blocking structural reforms – popularly gets blamed for the country’s economic stagnation. Grandstanding in Brussels can ensure tactical advantages in Rome. The cost – in terms of some erosion of support within Renzi’s traditionally pro-European Democratic party – is viewed as manageable.

Former Italian president Giorgio Napolitano has publicly cautioned Renzi against breaking with Germany. In an attempted sop to his critics, the prime minister travelled to the island of Ventotene in January to pay homage to Altiero Spinelli, an Italian political theorist regarded as one of the founding fathers of the European Union, where he delivered a speech described by one of those present as ‘long on ideals but short on concrete political ideas’. So far, the gamble appears to be working, and support for the government has increased.

Renzi is trying single-handedly to force the Italian position on the Commission, the German government and others hiding under German Finance Minister Wolfgang Schäuble’s mantle. The Brussels system works through alliances that mediate between national priorities to attain shared goals. Renzi is weak on both counts and old Brussels hands will readily observe that this line is unlikely to get him far.

Renzi has repeatedly argued that a projected increase in Italy’s 2016 budget deficit from 2.2% to 2.6% of GDP does not contravene EU rules. He says overshooting the target is crucial to ensuring Italy’s economic growth and ultimate stability. The dispute between orthodox monetarists in northern Europe and advocates of flexibility further south is nothing new. European Central Bank President Mario Draghi has called for a serious rethink of how the euro area is run, and Rome’s grievances are not without foundation. Yet the manner in which they are being put forward is puzzling.

The euro’s future is inextricably tied to a quantum leap in European political integration, formerly a tenet of Italian policy. Renzi’s posturing reflects frustration with the way he feels Italy is perceived in Europe. Addressing this perception increases his popularity. The quest for a privileged alliance with the UK is an oft tried, and regularly defeated, Italian fixation. Yet the tactician within him must know that Germany’s support remains crucial to extracting the wide-ranging compromises he craves from the ‘Brussels technocracy’ he publicly vilifies.

Renzi’s position in the EU – and more fundamentally his political survival at home – ultimately depend on this support. Alienating the Commission and Germany through repeated jibes may win political plaudits from a jaundiced Italian public. But his tactics risk losing a great deal more – for Renzi and for Italy.

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