Last week all that could be said about Italy was that it was facing new elections in the midst of a political crisis. Now, instead of elections it has a government based on an uneasy coalition between Luigi Di Maio of Movimento 5 Stelle and Matteo Salvini of Lega Nord. The coalition is uneasy because Salvini was eager to have elections while Di Maio was desperate to avoid them. Moreover, the coalition partners have different constituencies and different requirements from the budget. The two parties will have difficulties agreeing on a budget. The budget they’ll propose is likely to exceed the limits imposed on Italy by the currently prevailing arrangements. This could result in a renewed political crisis. The government may well fall, so we may be facing elections later this year or more likely early next year.
But the situation now will be very different from before. The intervening period will have been longer and instead of a technocratic government appointed by President Mattarella, a new government composed of Movimento 5 Stelle and Lega Nord will have been in charge.
The outcome of the next Italian elections will greatly depend on how the EU responds to the turmoil in Italy. There is a strong inclination in Europe to use the occasion to teach Italy a lesson. This attitude was recently expressed by EU Commissioner of Budget and Human Resources Günther Oettinger. I’m hopeful that the Commission will modify its hastily formed first impressions when it realizes the consequences. If the EU follows this line, it will dig its own grave by provoking a negative response from the Italian electorate, which would then re-elect Movimento 5 Stelle and Lega Nord with an increased majority.
Rather than trying to teach Italy a lesson, the EU should ask itself “What can Europe learn from the turmoil in Italy?” Historically, Italy has always been the strongest supporter of the EU because Italians didn’t trust their own governments. And with good reason: Italian governments had a tendency to be corrupt and follow policies that didn’t serve the interests of the people. But the EU must not punish the Italian people for the sins of its governments.
What were the legitimate grievances of the Italian people that caused them to vote for Movimento 5 Stelle and Lega Nord? First, there are a set of economic concerns. Italians are by and large pro-Europeans and they don’t want to be left out of the European project or the euro. But they have legitimate complaints as to the way the euro area is being managed. The Italian government needs to find a better way to change the narrative than threatening to leave the euro. If the new government introduced any innovation that could be seen as a parallel currency, that would trigger a run on Italian government bonds and a flight of deposits from Italian banks. The problems of a parallel currency are very complicated and they exceed my capacity to fully understand them. But the scholars presenting at the Trento Economic Festival have much to say about them.
Aside from economic concerns, the Italian public was upset by Europe’s flawed migration policies that imposed an unfair burden on Italy. The EU does not have a common migration policy. Each member state has its own policies which are often in conflict with the policies of other member states. But the EU does have some regulations, especially the so-called Dublin III Regulation, that applies to all member states. The Dublin III Regulation holds that refugees are the responsibility of the country where they first land. This has a disproportionate impact on Italy because of the international norm that requires ships rescuing refugees from the sea to land them at the nearest safe port, which as a practical matter means Italy.
Until recently, most refugees could move on to Northern Europe, where they wanted to go. But since September 2015, both France and Austria closed their borders and the rescued migrants were stuck in Italy. This situation was not only unfair but also financially very burdensome at a time when Italy was economically lagging behind most other European countries. That was the main reason why Lega Nord, in particular, did so well in the recent elections.
What can Europe do to influence the outcome of the next Italian elections in its favor? Last week in Paris, I presented an analysis at the European Council on Foreign Relations’ Annual Meeting suggesting that the EU must alter the current regulations and accept to pay the lion’s share for integrating and supporting migrants disproportionately stuck in Italy.
Forcibly relocating them to other countries is neither possible nor desirable. Other countries, particularly Poland and Hungary, would strenuously resist. Indeed, Hungarian Prime Minister Viktor Orbán won the last elections by basing his campaign on the false and ridiculous claim that I wanted to flood Hungary with Muslim immigrants. I have always advocated that the allocation of refugees within Europe should be entirely voluntary.
It follows from the voluntary principle that the problem of the Dublin III Regulation cannot be addressed by forced resettlement, but only by the EU financially compensating Italy for the migrants that land there. Historically, Italy has been very welcoming not only to political refugees but also to economic migrants. This changed only when France and Italy closed their borders and Salvini earned his electoral victory by inciting the Italian public against the migrants.
As a matter of fact, migrants impose a financial burden on the recipient country only until they are integrated. In the long run they make a much larger contribution to the recipient country than the cost of integrating them. I wonder how long inciting the public against migrants will remain a surefire way to win elections? Eventually people will realize that they are being misled by unscrupulous politicians. For instance, Salvini’s friend Orbán is directly hurting Italy’s interests by refusing to accept any refugees.
Reforming the Dublin III Regulation will be a long drawn-out process. In order to constructively influence the next Italian elections, the EU must make a firm commitment at its June summit that it will compensate Italy even before the process has been completed. This will require French President Emmanuel Macron and German Chancellor Angela Merkel to take the lead and persuade the dissenting forces within the EU to follow it.
The European Union has many problems to deal with at its June Summit. But Italy has become the most pressing one because it is threatening the very values on which the EU was founded.
In this context, I should also mention a Marshall Plan for Africa, variations of which have been supported both by Germany and France. As I explained at length at the ECFR meeting, a meaningful Marshall Plan would require at least €30 billion additional a year for a number of years. This is far in excess of what member states are willing or able to put up. But it could be financed by tapping the largely unused borrowing capacity of the EU. Right now, the future of the EU is too uncertain to launch the financing scheme, but if Germany and France undertook to pay the out-of-pocket expenses for the first year, which are bound to be minimal, it would go a long way to reestablishing confidence in the future of the EU. The amount invested would be small potatoes given what is at stake, namely the disintegration of the EU.
This is a more specific way to make the point I already made recently: the disintegration of Europe is no longer a figure of speech; it is a harsh reality.
To conclude, the EU faces a large number of threats both external and internal. From the outside, the EU is threatened by Trump’s America, Putin’s Russia, Erdogan’s Turkey and Assad’s Syria. Inside, Poland and Hungary are undermining the values on which the EU is based, but Italy is emerging as the most pressing challenge to its sustainability. The EU has little chance of avoiding disintegration unless the Franco-German alliance holds together. But that alliance is endangered by the elections for the European Parliament in 2019 where they will be opposing each other in order to control the selection of the next President of the European Commission. I don’t see how that fight can be avoided unless they agree to abandon the spitzenkandidat system and find a better way to select the next president.
France and Germany have many other issues to resolve, the most important of which is the future of the euro area. The euro has many unresolved problems and they must not be allowed to destroy the EU. It is important to recognize the problems in order to resolve them. Those who are trying to destroy the EU don’t realize what they would lose if they succeeded.