Is the euro zone safe with Giorgia Meloni’s “patriotic” economy? – POLITICS


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Giorgia Meloni is trying to portray herself as a pair of safe hands on the international stage when it comes to making sure Italy doesn’t blow a fatal hole in the eurozone. But his plans for the Italian economy are still at odds with Brussels economic orthodoxy.

The right-wing Brethren of Italy leader, who is in pole position to become Italy’s next prime minister, is trying hard not to scare off Eurocrats by pledging to keep the budget in order and avoid attacks head-on against the EU.

But her party’s record tells a different story, as she has consistently questioned some pillars of European integration, such as internal market rules, and is in no rush to implement some of the structural reforms Brussels.

“In Europe they are a bit worried,” Meloni told a rally in Milan last week. “The party is over, Italy will start defending its national interests, as others are doing,” she said, noting that other EU capitals are better than Italy at identifying their own interests and then defend them in Brussels.

In the corridors of the European Council and the Commission, officials are worried. Given the size of the Italian economy and its high level of debt, Italy is outsized when it comes to the stability of the 19-country eurozone. Meloni, with his patriotic mantras, will mark a stark departure from the ever-reliable Mario Draghi, the steadfast central banker loved by European elites in Brussels for his pursuit of single currency stability.

“Yes, we are worried,” said a senior EU Council official. “Italy has long been one of the weak links in the eurozone economy, its debt level is high. What happens in Italy matters.

There are particular concerns over whether Meloni’s brand of economic patriotism will force Italy to backtrack on key liberalizing reforms, such as opening up closed sectors, including beach tourism concessions and taxi drivers , which had been required by Brussels to operate the EU’s post-pandemic relief programme.

There are also indications that she has protectionist instincts when it comes to bailing out domestic champions and preventing international takeovers of household names, which will put her on a collision course with the guardians of the Single market EU without borders between countries.

Tax fears

Even though Meloni insists she will be careful with public spending, some countries fear that it will be difficult to find compromises with a government led by her on key negotiations, such as those aimed at reforming budgetary rules. of the EU, where Italy wants more leeway. .

“The question is whether there will be a sincere negotiation, a serious position coming from Meloni, and some of his past statements do not bode well,” said an EU diplomat, recalling Meloni’s position . anti-euro positions in the old days.

But Giulio Tremonti, who served four times as finance minister under Silvio Berlusconi’s governments and is currently running with Meloni, offers assurances that there will be no tensions between a Meloni-led government and Brussels. For him, the explanation is not Meloni’s moderate shift towards sound financing, but the fact that the EU, in the meantime, has changed profoundly.

Giulio Tremonti served four terms as Italy’s finance minister under Berlusconi | Andreas Solaro/AFP via Getty Images)

“With this type of Europe” it is possible to get along, Tremonti told POLITICO. “This Europe is radically different” from what it was, he added, welcoming for example the decision of Brussels to resort to the common debt, which he has been advocating for a decade, as he proudly underline.

The idea that the EU has slacked off when it comes to imposing tough debt and deficit rules is true to some extent. European Commission President Ursula von der Leyen stressed the need for “flexibility” with regard to the Stability and Growth Pact in her State of the Union address this month, and stressed a reform of the rules which is expected in October. Indeed, the need for more flexibility is an idea floated by French President Emmanuel Macron and Prime Minister Draghi late last year.

The crucial question will be whether Meloni continues the ideological alliance with Macron if she becomes prime minister, even though her anti-French past might suggest otherwise. Over the past five years, Meloni has stoked Franco-Italian rivalry by repeatedly attacking the French government on issues ranging from industrial rapprochements to migrant flows, and opposed a bilateral treaty signed by the two countries l ‘last year.

“I hope we will see in Brussels and in the most recent negotiations [version of] Meloni, who is more moderate and more centrist. But there is still the fear in the back of everyone’s mind here that we might see the old Meloni when she is elected,” the same diplomat said.

Protectionist mood

For some member countries and investors, the main concern is that Meloni would slow down the structural reforms led by Draghi, which are a condition for obtaining funding under the EU’s post-pandemic recovery plan.

It is one of the reasons why, last month, the rating agency Moody’s downgraded Italy’s credit profile from “negative” to “stable”, underlining the risk that the right-wing coalition could classify Draghi’s reform program in a drawer.

“A centre-right coalition made up of the Brothers of Italy, Lega and Forza Italia is the most likely outcome. Such a future government could try to test the will of the European Commission to strictly apply the conditions of its [national recovery plan]”said Sarah Carlson, principal analyst at Moody’s, in a note.

The right-wing coalition is indeed proposing to re-discuss with the European Commission the country’s recovery plan in light of the current energy crisis to modify some of the projects financed with EU money, insisting that this is possible under EU law.

At the same time, Brothers of Italy MPs in Rome opposed one of the key reforms agreed with Brussels to secure the funds, Draghi’s so-called ‘competition decree’ which would bring Italy closer to complying with EU law. .

From the opposition benches, Meloni has been one of the fiercest opponents of this decree which includes a set of reforms that would open up competition in several sectors by organizing public tenders as provided for in European legislation. His party, and more broadly the centre-right coalition, took on the side of beach concessionaires and taxi drivers who did not want to compete with the new operators.

“The centre-right coalition and in particular the Brothers of Italy are questioning some basic principles of EU competition law and the EU single market,” said Tommaso Valletti, former chief economist of the European Commission, now a professor at Imperial College London.

In matters of industrial policy, the Brothers of Italy have called for a major role for the State in the Italian economy. Whereas during the campaign, Meloni herself has avoided taking a position on single issues, in the past she has argued that the struggling Italian airline – formerly Alitalia, now ITA Airways – should remain in public hands and that the state should own the country’s broadband network, a solution which would imply excluding the French group Vivendi, which is currently a major shareholder in the Italian incumbent Telecom Italia, from holding shares in the owning company of the network.

His program also includes the temporary extension of foreign investment screening to EU investors and the obligation for non-EU companies to present a bank guarantee if they wish to invest in Italy.

A government led by Meloni would be “more protectionist than previous frameworks in the name of the national interest”, said Lorenzo Castellani, adjunct professor in political science at LUISS University in Rome. Whether Meloni will walk the talk remains to be seen, he warned.

A Commission official noted with regret that Brussels knew it had a “dream Italian government” led by Draghi, but was all too aware that one day it would always end.

Is the euro zone safe with Giorgia Meloni's “patriotic” economy? – POLITICS

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