Italy’s populist new government could increase stress on EU unity

The Yomiuri ShimbunItaly’s new government is founded on populism and loudly objects to some European Union policies. This new administration could jolt the EU’s unity.

Political turmoil that had rumbled on since March’s general election has finally been resolved with the launch of a coalition government. The left-leaning 5-Star Movement, which was founded only several years ago, and the League, which champions far-right causes, have formed what might be called an alliance of oil and water.

Giuseppe Conte, a legal scholar and a political novice, has been appointed prime minister. In a policy speech, Conte said, “If populism means the ruling class listens to the needs of the people ... these political forces deserve” that label. He called for shattering the existing way of doing politics.

With regard to the EU, Conte announced his intention of demanding a review of the fiscal discipline the bloc has imposed on member states and its policy on accepting refugees. This can be said to be a start that will inspire anxiety about Italy’s cooperation with the EU.

Behind the government’s hard-line stance is rising anti-EU sentiment among Italian citizens. According to a public opinion survey, only 39 percent of Italians felt positively about their nation being an EU member. This was the lowest percentage seen in any of the 28 EU member countries.

Due to the 2011 financial crisis, Italy was forced to adopt austerity policies and structural reforms led by the EU. “Reform fatigue” among citizens and the surge in illegal immigrants undoubtedly laid the foundations for the big gains made by populist parties and for anti-EU policies.

Rectifying economic gap vital

It is problematic that the new government has drawn up pork-barrel policies with inadequate financial foundation, such as major income tax cuts and guaranteeing a minimum wage. Fiscal reconstruction, which was finally starting to produce good results, could get shunted back to square one. Such policies could even breach EU rules on fiscal discipline.

Italy’s ratio of government debt to gross domestic product stands at about 130 percent, the second-highest ratio in the EU after Greece. Financial markets believe a potential crisis could be lurking in Italy and are very closely watching developments there.

Extreme caution is needed to ensure this does not develop into a financial and economic crisis across Europe. The new Italian government should also listen to the views of the EU and markets, and not hesitate to amend its populist policies.

Italy is the eurozone’s third-largest economy. Since the European Economic Community was launched in 1958, Italy has been part of the core group of nations promoting regional integration. Germany and France, which have spearheaded this integration, must seriously face up to the situation that has created a euroskeptic administration in Italy.

It appears EU policies that did not consider each nation’s individual circumstances and excessively focused on fiscal discipline might have been a factor that sparked this backlash against the bloc.

EU leaders will hold a summit meeting late this month. The leaders will need to deepen their discussions on growth promotion policies intended to rectify economic disparities in the region.

(From The Yomiuri Shimbun, June 8, 2018)Speech


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