Member states must not let Commission stand against Italy alone

DISCLAIMER: All opinions in this column reflect the views of the author(s), not of EURACTIV Media network.

Italian premier Giuseppe Conte (L) with Italy's interior minister Matteo Salvini during the press conference on the fiscal maneuver at Chigi Palace, Rome, Italy, 15 October 2018. [EPA-EFE/GIUSEPPE LAMI]

The rejection of Italy’s draft budget by the European Commission on Tuesday is unprecedented in the history of the Stability and Growth Pact. Member states cannot sit idly by but must take a more active role in the political conflict over fiscal sovereignty.

Reinout van der Veer is PhD Candidate in Political Science at Erasmus University Rotterdam.

Many analysts have hailed the move as necessary in order to prevent the Italian populist government from endangering the common currency. Yet despite the red lines defended by the Commission, the Italian government has manoeuvred itself into in a win-win position.

The reason the Commission is on the back foot lies with its role as neutral EU bureaucracy and its associated strategy of depoliticisation. The expertise-driven Commission relies heavily on complex fiscal projections, opaque legal procedures and technical rhetoric to draw conflicts out of the political and into the technical arena.

Politics involves choosing between different solutions because they resemble different values; technocrats agree on values and seek only the solution that optimices them.

Commission rejects Italian draft budget in unprecedented decision

The European Commission rejected Italy’s 2019 budget in an unprecedented decision on Tuesday (23 October), after the government in Rome failed to give a substantial response to the executive’s allegations of a breach of the EU law.

This is why the warning letter (October 18) to the Italian government by Commissioners Dombrovskis and Moscovici was riddled with expert terminology and references to EU law. It is also why Dombrovskis defended rejecting the budget by stating that the Commission saw “no alternative”.

This strategy understands that the Italian position is unlikely to change, but aims to instil market confidence while warning other member states that fiscal noncompliance has consequences.

Populists have understood depoliticisation can effectively be countered by a strategy of politicisation. By depicting everything EU institutions do, no matter how evidence-based, as a political assault on the nation state, populists can effectively undermine the credibility of these institutions.

Ministers press Italy to respect common rules in budgetary spat

Eurozone finance ministers and the European Commission called on the Italian government on Monday (1 October) to respect the EU’s fiscal rules, saying the “non-compliant” budgetary plan announced by the third largest eurozone economy could destabilise the region.

This strategy aims to delegitimise the expertise of EU institutions and draw conflict back into the political arena where populists have a natural advantage. Politicisation is especially effective in Europe because EU institutions already have greater difficulties connecting to European publics than national leaders, prohibiting them from providing an effective political counter-narrative.

After Orbàn, Poland’s Law and Justice and the Brexiteers it is now the Italian leadership, most notably Salvini (Lega) and Di Maio (M5S), that is employing this strategy.

It is visible in the stark difference in language used in Italy’s response to Dombrovski’s and Moscovici’s letter (22nd of October) and from Di Maio’s attack of the budget rejection on his Facebook page, where he pledged that “we won’t give up because if we do, technocrats who are pro-banks and pro-austerity would be back… It’s the first Italian budget the European Commission doesn’t like. It doesn’t surprise me because it’s the first budget that is written in Rome and not in Brussels.”

Politicisation creates win-win conditions for Salvini and Di Maio. They win if the Commission cannot credibly enforce its control over the Italian fiscal stance, as they can claim credit for any short-term gains while long-term costs are placed on Italy’s future generations.

Long-term costs can be blamed on Europe too, as Salvini demonstrated after the bridge incident in Genoa in August.

Yet they also win in case the Commission does resort to the yet-to-be-imposed sanctions in the EU legal framework. Any sanctions will likely rile Eurosceptic platforms in Italy, politically empowering Salvini and Di Maio as a consequence.

Their win-win position implies that Salvini and Di Maio will keep provoking the Commission in the hope that it will try to bite again.

Juncker: If we accept the Italian budget, 'countries would insult us'

European Commission President Jean-Claude Juncker told Italian media on Tuesday (16 October) that he could not accept the extra spending budgeted by the Italian government because other member states would “insult” the institution.

The Commission may consider playing for time in the hopes that markets will discipline the Italians, or until the European Central Bank and European Banking Authority join its pressure campaign on Italy. However, Draghi has already stated that he sees no role for the ECB as mediator of the row.

Moreover, with European elections on the horizon, the wait is equally advantageous to the recently-elected Italian populists, who seek to capitalise electorally on their conflict with EU institutions.

The core conflict over the Italian budget is over political, not economic issues. Yet in contrast, the political storms raised by Di Maio and Salvini, other member state governments have kept remarkably quiet. Some have explicitly deferred the issue back to the Commission when asked to comment.

It is not fair nor effective to let the Commission stand against Italy alone. EU leaders must be more vocal and explain why Italian fiscal expansion is not just an Italian issue. A rising Italian sovereign debt is as much a problem for Latvian, Spanish and Belgian citizens as it is for future Italian generations.

The Brief – Enemies of Europe

Economic matters matter again, as the Italian government wants to showcase its battle against the European Commission over its spending plan as a renewed European crusade against austerity. But who are the real enemies of Europe?

Subscribe to our newsletters