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Rome and Europe are heading for conflict

Rome and Europe are heading for conflict

Rising euroscepticism threatens Rome co-operation

by Erik Jones in Bologna

Mon 12 Mar 2018

Italians have been showing signs of losing confidence in European integration for a long time. Eurobarometer polling data from October and November 2017 revealed that only 45% of Italians believe participation in the euro is good for their country. Though an improvement over previous results, that was worse than in any euro area country except Latvia. Polling done later in the year showed only 34% of Italians trust European institutions, while 64% believe their voices do not count and 43% do not feel like European citizens.

In the general election on 4 March, around 32.5% voted for the Five Star Movement (M5S) and another 17.5% voted for the League. When one adds in the 4.5% who voted for the Brothers of Italy, more than half the electorate supported openly eurosceptic groups.

At a minimum, tension between Italy and the rest of Europe seems set to increase. In the worst case scenario, European leaders will lose patience with the slow pace of Italian politics. Any resulting conflict is unlikely to improve Italian perceptions of the advantages of European integration, and is more likely to bolster eurosceptic arguments by the League and M5S, the two big winners from the election.

'Europe' did not play a prominent role in the public debate leading up to the vote – cutting taxes and throwing out the 'ruling class' were more important. But M5S and the League advocated policies including rolling back pension reforms and introducing a basic minimum income. These would bring Italy quickly into conflict with the European Commission over fiscal consolidation. Any future Italian government will have to draw support from one or both parties.

Italians have three major concerns. First, economic growth is not accelerating quickly enough to restore savings that were depleted or to make up for income lost during the recession. Second, although migration into Italy has slowed, tens of thousands of migrants from sub-Saharan Africa are yet to be processed, returned or integrated into society. Third, Italy's banks are still recovering after significant failures threatened to wipe out household savings in parts of the country.

These factors have contributed to falling support for the governing Democratic party (PD). According to Italian polls, almost 10% of the increase in support for M5S relative to that party's performance in 2013 came from previous PD supporters. Around 17% of the votes lost by the PD since its peak support in the 2014 elections for the European Parliament went to M5S.
Solving Italy's problems related to slow growth, migration and banking will depend heavily on co-operation between Rome, European institutions and other member states. If Europe is to provide support, Italy's politicians must show that they are prepared to make the necessary changes to their fiscal, regulatory and border operations.

The alternative is for European institutions to apply strict conditionality on any assistance. This would entail sending representatives from the Commission to cajole Italian law-makers into raising taxes and cutting spending or liberalising market institutions. It implies difficult discussions about migration policy in the Council of the European Union and repeated threats by neighbouring countries to strengthen their borders and so contain migrants in Italy. It may likewise point to more assertive action from the European Central Bank in forcing Italian banks to clean up their balance sheets and build larger capital buffers. Such measures will create even greater friction between Italy and European institutions.

The next government will have to rein in spending if it is to avoid an automatic rise in value added tax rates next autumn. It will have to work hard to shore up the deal with Libya that controls the flow of migrants. And it will have to contribute to European discussions about macroeconomic governance reform and European banking union, while strengthening Italian banks. Neither M5S nor the League seem inclined to undertake these measures with any urgency. Given the prospect of European Parliamentary elections and a new Commission in 2019, the rest of Europe seems disinclined to wait.

Erik Jones is Professor of European Studies and International Political Economy and Director of European and Eurasian Studies at Johns Hopkins University.

This is the second article in a series on the results of the Italian election. The first, from Antonio Armellini, former Italian ambassador to India and Nepal, was published on Friday 9 March.

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