Former Italian prime minister Matteo Renzi has pulled the plug on the country’s ruling center-left coalition.
Renzi, now a senator, has withdrawn his 48 lawmakers and three ministers (one junior) from the coalition ostensibly over a spending dispute. He wants to use Italy’s €200+ billion share of the European Union’s €750 billion coronavirus recovery fund to invest in infrastructure and the green economy. The other ruling parties prefer to use the bulk of the money for short-term stimulus.
Renzi has also proposed to tap into the European Stability Mechanism (ESM), set up in the wake of the euro crisis, to help pay for Italy’s increased health care expenses, something Prime Minister Giuseppe Conte has resisted. ESM funding would come with strings attached. Countries are free to spend their share of the coronavirus recovery fund however they see fit.
Renzi’s proposals have merit. Italy is failing its next generation. It needs structural reforms — which ESM support would require — to catch up with the rest of Europe. Spending €200 billion to prop up the Italian economy in the short term is a wasted opportunity.
But expecting the other ruling parties to meet his terms, when Renzi’s is by far the smallest of the three, is unreasonable. Throwing Italy into a political crisis when it is still suffering one of the worst outbreaks of coronavirus disease in the world is irresponsible.
Massive rescue programs have prevented business failures and unemployment on the scale of the Great Depression, even though last year’s economic contraction was nearly as bad. The European Union agreed a €750 billion recovery fund, financed, for the first time, by EU-issued bonds. The money comes on top of national efforts. The United States Congress passed a $2.2 trillion stimulus, worth 10 percent of GDP, in March and added another $484 billion in April. An additional $900 billion in relief was included in this year’s budget.
Joe Biden, the incoming American president, wants to spend $2 trillion more over the next four years to transition the United States to a greener economy and create a public health insurance program. Corporate tax would go up from 21 to 28 percent.
In Spain, a socialist government has introduced the biggest budget in Spanish history — partly to cope with the impact of coronavirus, but also to finance digitalization, electric car and renewable energy subsidies, infrastructure and rural development. Taxes on income, sales and wealth are due to increase.
In the United Kingdom, the ruling Conservative Party is building more social housing and it might renationalize rail. Unlike during the last economic crisis, it does not propose to cut spending even though tax revenues are down.
Same in the Netherlands, where all the major parties agree the government needs to do more to reduce pollution and prevent people at the bottom of the social ladder from falling through the cracks.
I’m not opposed to more government per se. I’ve argued that the United States should imitate countries in Northern Europe to improve its public services, particularly child and health care and housing.
The Dutch government is criticized in the international media for resisting EU grants (it prefers loans conditions on reforms) to help pay for the economic recovery in coronavirus-struck Southern Europe. But the critics are oddly incurious about the Netherlands’ motives.
An editorial in Monday’s Financial Times is typical. It accuses Prime Minister Mark Rutte of singlehandedly putting the EU economy at risk, but it resorts to stereotype and innuendo to explain why he’s unwilling to sign off on a €750 billion recovery fund: the Dutch are stingy and Rutte is worried about losing voters to the Euroskeptic right. (He’s never been more popular.)
Mr Rutte pays lip service to the idea of a stronger, geopolitical Europe but is unwilling to accept the price tag that comes with it, especially with national elections looming next year.
I single out the Financial Times because it should know better. There have been worse opinion columns in the Italian and Spanish press.
At least the Financial Times hints at the need for “productivity-enhancing reforms” in Italy and Spain, which have borne the brunt of the coronavirus pandemic. But it doesn’t say which reforms or why.
It’s been a bad few months for Italy’s populist right-wing leader, Matteo Salvini.
First his erstwhile governing partner, the Five Star Movement, and the opposition Democrats outmaneuvered him by teaming up to avoid snap elections which polls predicted Salvini’s League would win.
Now his antics in reaction to the government’s coronavirus policy are falling flat.
Salvini and his party “occupied” parliament (refusing to leave the chamber) to demonstrate against the COVID-19 quarantine. He has tweeted out disinformation about the disease, claiming it was created in a Chinese lab. Few Italians care.
Alberto Mingardi of the libertarian Bruno Leoni Institute in Milan argues in Politico that the “deep roots” of Italy’s coalition chaos lie in an electoral system that makes it hard for any one party to govern.
Italy’s most popular politician appears to have made a huge mistake.
Matteo Salvini, the country’s hardline interior minister, brought down his far-right League’s government with the anti-establishment Five Star Movement on Tuesday, hoping to trigger early elections that polls suggest his party would win.
30 percent of Italians between the ages of 15 and 24 are out of work, more or less the same rate as in Spain but almost double the eurozone average.
Of those in work, the majority are on temporary contracts.
Nearly eight out of ten young Italians are in part-time work and unable to find full-time employment, the highest rate by far among large European economies. In France and Spain, it’s about 50 percent.
Italy spends far less on tertiary education that its neighbors. The result: only 27 percent of Italians in their thirties have a university degree, the second-lowest rate in the EU, where the average is 40 percent. Italy does especially poorly in educating migrants: just 13 percent of its foreign-born population has completed university against 36 percent in the EU as a whole.
Average real incomes are roughly at the level they were in 1995. In France, Germany and Spain, they have grown about 25 percent.