Italy Government Deal: What’s In It and What’s Next
Italy’s populist Five Star Movement and (formerly Northern) League have finalized a coalition agreement.
Among their policies are:
Reducing personal and business taxes to two rates: 15 and 20 percent.
A €780 monthly basic income for poor families.
Repealing 2011 pension reforms that raised the retirement age and made the system financially sustainable.
Withdrawal of EU sanctions on Moscow.
Speeding up the deportation of around 500,000 immigrants.
The final version of the text does not call for a pathway for countries to leave the euro, nor does it call on the European Central Bank to cancel €250 billion in Italian debt. These proposals had been in leaked drafts.
However, the planned fiscal measures will almost certainly cause Italy to break the EU’s 3-percent deficit ceiling. Read more
British Home Secretary Resigns, Italy’s Five Stars Make Overture
British home secretary Amber Rudd has resigned for misleading lawmakers about her migration policy.
She told Parliament there was no Home Office target for deportations, but then The Guardian revealed she had written to Prime Minister Theresa May about her aim to increase “enforced removals” by 10 percent.
Politico reports that Rudd’s departure — the fourth by a cabinet minister in six months — risks destabilizing May’s government at a time when it is negotiating Britain’s exit from the European Union. Rudd was one of the leading pro-EU Conservatives and seen as a potential future party leader.
The scandal also shines a spotlight on May’s failure to develop a new immigration policy almost two years after the Brexit referendum in which it played such a major role. Read more
Five Stars Eye Coalition, Dutch Form Anti-Macron Pact, Cohn Resigns
Italy’s Five Star Movement may go into coalition after all. Having placed first in the election on Sunday, the populist movement is reportedly eying an accord with the left.
The Five Stars, center-left Democrats and left-wing Free and Equal would have a majority in the new parliament.
The Five Stars and Free and Equal share views. Free and Equal was formed last year by Democrats critical of Matteo Renzi’s market reforms.
Renzi has come out against a deal, calling the Five Star Movement “anti-European”. But he is on his way out as leader. The rest of the party may be willing to reverse his signature labor reforms in return for staying in power.
For the rest of Europe, a Five Star pact with the left would be better than a Five Star pact with the right. The worst-case outcome would be a government of the Five Stars, (Northern) League and Brothers of Italy — parties that are anti-EU, anti-immigration and pro-Putin. Read more
Macron Breaks Taboo, Spain Makes Gibraltar Demands
Emmanuel Macron touched one third rail of French politics and didn’t die: labor reform. Now he is grabbing the other: agriculture.
French farmers rely heavily on EU agricultural subsidies and are generally less innovative (defenders would say more traditional) than their peers in Germany and the Netherlands, the two largest exporters of agricultural goods in Europe.
Macron has already opened the door to subsidy reform, arguing that, due to Brexit, cuts are inevitable.
At the same time, he has promised €5 billion in public investments to kickstart a “cultural revolution” in the sector.
That may not be enough to convince skeptical farmers while cutting EU subsidies will run into opposition from Italy, Poland and Spain. But it’s a start. Read more
Nobody Is Happy in Germany, League Calls for Italian Euro Exit
Nobody in Germany is happy with the deal Angela Merkel struck with the Social Democrats this week.
Politico reports that conservatives are upset she gave the Finance Ministry to the left. The party’s youth wing is openly calling for Merkel’s replacement.
The Financial Times reports that Martin Schulz is testing his Social Democratic Party’s (SPD) unity by joining the new government as foreign minister.
Tilman Pradt argued here the other day that Schulz has wasted away his credibility by reneging on his promise never to serve under Merkel. “Given the fate of its sister parties in Europe,” Pradt wrote, “the SPD should have been aware of the dangers of putting personal ambitions over party politics.” Read more
Italian Voting Reforms Could Have Little Impact on Balance Between Parties
Voting reforms enacted by the Italian parliament this week could do little to make the country more governable, an analysis of Ipsos polling data by Corriere della Sera reveals. The three main political blocs would remain roughly equal in size.
The new law allocates a third of the seats in the lower chamber on a first-past-the-post basis and removes the premium for the largest party.
The expectation was that these changes would hurt the populist Five Star Movement and help the mainstream left and right.
But it turns out the effect could be negligible. Read more