Five Stars Eye Coalition, Dutch Form Anti-Macron Pact, Cohn Resigns

Dealmaking starts in Italy. The Dutch assert their interests. Donald Trump loses his top economist.

Italian parliament Rome
Palazzo Montecitorio, seat of the Italian parliament, in Rome (Shutterstock)

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.

Dutch form anti-Macron pact

The Netherlands is making common cause with Denmark, Estonia, Finland, Ireland, Latvia, Lithuania and Sweden to resist the eurozone reforms of French president Emmanuel Macron.

In a joint statement, finance ministers from the eight northern countries underline their commitment to enforcing debt and deficit rules, completing the single market and pursuing free-trade deals. They caution against far-reaching reforms that do not have popular support.

Germany’s Süddeutsche Zeitung calls it the rebellion of the small eight against the big two.

Britain’s exit from the EU, and the incoming German government’s support for Macron, have convinced the Netherlands to step up. Traditionally deferential to Germany, it is now asserting its interests.

No open skies

So much for Donald Trump’s promise to ease Britain’s exit from the EU. The Financial Times reports that the United States would give their ally a worse “open skies” deal for airlines than it currently enjoys. That could force British Airways and Virgin Atlantic to cut transatlantic flights.

I warned here around the time of the American election that Trump’s European admirers were deluding themselves if they expected favors from him. Trump couldn’t have been clearer: it’s “America First”.

Cohn resigns

Speaking of America First, bad policy is causing yet another Trump advisor to leave. Gary Cohn, the president’s top economist, is resigning in protest to tariffs on aluminum and steel.

Cohn’s ouster makes it more likely the tariffs will be levied. Which will compel China and the EU to respond with protectionist measures of their own, which will trigger a trade war that leaves everybody poorer off.

Josh Barro explains in Business Insider why Republicans in Congress, who are pro-trade, won’t stop Trump.