Budget: Rome and Brussels on collision course

There is still no sign of an agreement in the budget row between Italy and the EU. Even before Brussels could examine Rome's explanation for the high level of new debt, the Italian government announced that it had no intention of amending its draft budget. One side has all the trump cards in this power game, commentators observe.

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Der Standard (AT) /

The Eurozone is blackmailable

Rome is being allowed to take a good few liberties, Der Standard complains:

“The European Central Bank has around a fifth of the Italian bonds on its books. The money would be lost if Rome could no longer service its debts. Then there's the new, higher commitments in the euro payment system Target2, for which the monetary union effectively assumes liability. The Eurozone has made itself susceptible to blackmail by assuming these risks. In addition, other euro countries are increasingly dependent owing to the danger of contagion, which would increase if Italy collapsed. ... All this leaves Brussels in a very weak position to push for fiscal regulations to be adhered to. Italy can basically thumb its nose at the monetary union.”

Süddeutsche Zeitung (DE) /

We need to talk about redistribution

For the Süddeutsche Zeitung the dispute touches on a fundamental problem with the Eurozone:

“Yes, it's true that the budget goes against the spirit of the Stability and Growth pact. That is unacceptable. But it's also unacceptable that every German government since Helmut Kohl has ignored the fact that the current rules only reinforce inequality in the Eurozone. However, because Germany is among the winners it doesn't want to acknowledge the problem of the others. ... One can interpret Rome's insistence on its budget as blackmail: either you pay or the euro collapses. Or as Italy ruthlessly demanding what Merkel refused French President Emmanuel Macron; namely a redistribution mechanism from the strong to the weak within the Eurozone.”

La Repubblica (IT) /

Cynical election manoeuvre

Rome's main priority isn't the budget at all, writes economist Francesco Manacorda in La Repubblica:

“The attacks that Rome levelled at Europe and its regulations last week conceal a clear - and cynical - political calculation that can first and foremost be traced back to the Lega. The invocation of a new 'external front' which is to be fought after the refugees have been dealt with could help Salvini and the Lega gain more support in the European elections this spring. It's a clear calculation: now that the popularity of the EU is at an all-time low, portraying it as an enemy is turning out to be profitable indeed.”

Deutschlandfunk (DE) /

How Brussels can score points with the Italians

Deutschlandfunk calls for a more lenient stance vis-à-vis Italy:

“The Commission should allow Italy to take on the new debt as planned, just as it was lenient with Germany and France when they exceeded the deficit limit. In return, however, Brussels should demand that more is done to fight corruption and more money is shifted from the bloated state to investments. In this way the EU Commission would show people in Italy that it understands their pain and anger. And Brussels would do something to ensure that the alarming Euroscepticism in Italy, which used to be so pro-European, doesn't increase.”

Die Presse (AT) /

Rome has little room to manoeuvre

Italy's government has the short end of the stick in its budget row with the EU Commission, Die Presse comments:

“The EU must negotiate with Rome and hope it will receive support from the markets. Some Lega politicians are already getting edgy, because they see that their own banks would be the first victims of their policies. The US ratings agency Standard & Poor's will hand down its judgement on the country this week. ... If the money runs out, it will be difficult for Rome to continue pushing its luck vis-à-vis Brussels. Unlike in Greece, its creditors aren't located far from home. Two thirds of Italian government bonds are owned by Italians. If the government really does drive Italy into bankruptcy, the Italians will be the first to suffer.”

Les Echos (FR) /

Don't ease the pressure now

Although the constraints imposed by being in government could soften the edges of Italy's populists Brussels must not ease the pressure, Daniel Fortin urges in Les Echos:

“The best prospect of stopping the rising tide of populism in Europe is results from participation in government and the impasses that come with it. ... Brussels has every interest in maintaining a hard line in the face of Italy's delirious draft budget. That also seems to be the approach chosen by the Commission. ... And while there is a real risk that part of the Italian public could turn against Europe, ushering in a major political crisis, this risk must be taken because history shows that laxism never pays off.”

Il Giornale (IT) /

A disaster for the Italians

Italy's draft budget is simply catastrophic, comments Alessandro Sallusti, chief editor of newspaper Il Giornale, which is part of Silvio Berlusconi's media empire:

“The budget approved by the government makes losers of the Italians. And in particular those Italians who really believed in the possibility of change. This is the most amateurish manoeuvre I can remember because the budget lacks any plausible economic coverage. It is a budget without any vision or goals. A perfect reflection of the government that sustains it. A cobbled-together confusion of measures that contradict each other. ... In short, it is a chaos that has people shaking their heads not just in Brussels.”

L'Opinion (FR) /

Happier picking fights than reforming

Lega and Movimento 5 Stelle are setting Brussels up as the scapegoat without addressing Italy's key problems, sighs Maxime Sbaihi, head of the liberal think tank Génération Libre, in L'Opinion:

“The weak points of the Italian state could be reformed, but they're in the blind spot of the populist revolution. A revolution worthy of the name would seek to redefine the boundaries of the state, clean up the banking sector once and for all, facilitate access to the job market, negotiate an ordered restructuring of the public debt with creditors, and introduce a flat tax to finance a true universal basic income. Salvini prefers making noise to showing courage and vision. He prefers to attack Brussels instead of tackling the roots of the problem in his country.”

Süddeutsche Zeitung (DE) /

Playing poker with the populists

Süddeutsche Zeitung explains how Europe could effectively put pressure on Italy:

“The best course would be not to simply reject the budget, but to offer negotiations. A little more welfare, meaning a little more debt, would be viable - if the government offers structural reforms in return and doesn't touch crucial pillars like Mario Monti's pension reform. Playing poker with the populists. Such a confusing situation will make it more difficult for the government in Rome to score points at Brussels' expense. And gradually the pressure from the capital markets will make itself felt.”

Der Standard (AT) /

Italy picking a fight

The stakes are very high for the EU in its conflict with Rome, Der Standard comments:

“Up to now Brussels has turned a blind eye on excessive deficits, given states more time and accepted prevarications. But now it faces its toughest test: the government in Rome has submitted a budget that grossly deviates from the agreed deficit targets - absolutely deliberately. The Five Star Movement and the League are picking a fight with the EU because they want to show it the limits of its power. This conflict is not just about budget figures but about the future of Europe.”

Jyllands-Posten (DK) /

Greek drama should be a lesson

Jyllands-Posten hopes that Italy has learned from the mistakes of other euro countries:

“It's very frustrating for Italy's neighbours, and not least for us as an EU partner, that we can now expect a repetition of the Greek drama. In recent years Athens has been saved from the consequences of its excessive consumption and irresponsible financial policies mainly by Germany. Germany, in turn, was widely criticised for this, because Berlin didn't want to throw the money out the window and demanded reforms that were painful but necessary. We very much hope that the Italians are smarter than that. We fear, however, that they aren't, and will go on living la dolce vita until disaster strikes.”

Frankfurter Rundschau (DE) /

No reason to panic

The EU has several instruments with which it can force the government in Rome into submission, writes the Frankfurter Rundschau:

“There are the political admonishments which have already forced the government consisting of the populist Five Star Movement and the far right League to make some concessions. And there are certain harsh sanctions that Brussels can impose if Rome really refuses to adhere to the stipulated deficit criteria. Moreover, it can't be ruled out that the financial markets will continue to put Rome under pressure. Already in recent days the yields on Italian bonds have risen markedly. That could easily push up the costs for the Italian government by several billion euros per year. That's why we must wait and see what other alterations the parliament in Rome will make to its draft budget.”