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The Italian Crisis

Silvia Merler, (2018), “The Italian Crisis”, Bruegel, 4 June

Ferdinando Giugliano notices how the Italian president has been cast as an enemy of democracy after his refusal to accept a eurosckeptic finance minister, while the anti-establishment League (La Lega) and the Five Star Movement (Movimento 5 Stelle or M5S) parties – who chose to blow up their attempt to form a government instead of proposing an alternative name – have been hailed as defenders of the popular will. The longer the wrangling goes on, the clearer it becomes that the populists are playing politics. The populists are meant to be a break from the established way of doing politics, but their manoeuvrers show they are anything but. And they are taking a real toll on the country.

Ashoka Mody writes on Bloomberg that President Mattarella has undermined the euro. In rejecting the choice of a popularly elected coalition, he may well have set in motion a financial crisis from which it will be hard to pull back, and which could imperil the entire European project. No doubt, Savona was an abrasive choice: his proposed “Plan B” in case of euro exit was unworkable and alarmist, and therefore could have done Italy great damage. But Mody thinks that amid its over-the-top rhetoric, the M5S-League coalition makes some sensible proposals and, instead of giving the euroskceptics an opportunity to deal with the complexities of governing, Mattarella is attempting to establish yet another technocratic government. In trying to preserve European orthodoxy, this may unleash destructive forces that can’t be controlled.

Jakob Funk Kirkegaard also thinks that Mattarella has put Italy on a path of political confrontation domestically and, most likely, with financial markets and the rest of Europe too. Europe has been down this path before – in Greece in the summer of 2015. But just as Prime Minister Alexis Tsipras denied he was against the euro in the July 5, 2015 referendum on whether Greece should accept the Troika bailout conditions or not, so too now the leaders of Italy’s two main parties, Matteo Salvini of the League and Luigi Di Maio of M5S, will say that they also don’t oppose Italian membership of the euro. Instead, they will likely frame another Italian election campaign as being about “standing up to Germany/Brussels” in support of Italian sovereignty and Italian ability to run its own fiscal and economic affairs.

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