Troublemaker

Troublemaker

Taken From: The Economist

A cabinet minister mused recently, was seen in the past as a country that did not make trouble. But that was in the past. Lately the left-right coalition of the prime minister, Matteo Renzi has provoked a succession of acrimonious disputes with the European Commission and Germany. This week, in the latest sign of Mr Renzi’s determination to be the bad boy of Brussels, he sacked Italy’s permanent EU representative, Stefano Sannino, a former Commission official who was seen as too accommodating. His replacement is the junior trade minister, Carlo Calenda, a member of Mr Renzi’s Democratic Party.

The conflict burst into the open on January 15th, when Jean-Claude Juncker, president of the commission, accused Mr Renzi of attacking his institution at every turn. Mr Renzi replied that the days when Italy let itself be “remote-controlled” from Brussels were over. Four days later Manfred Weber, the German who leads the centre-right group in the European Parliament, said Italy’s prime minister was jeopardising the EU’s credibility.

Mr Weber was referring to the sharpest of all the current disputes: Italy is blocking refugee aid funds the EU had promised Turkey as part of a deal to crack down on smuggling of migrants into Europe.

Germans are especially bitter because Italy has been accused of failing to process migrants who arrive on its soil, instead hurrying them on to other EU states. Ministers in Rome say they doubt that paying the Turks to hold back Syrian refugees will work. But Mr Weber claimed Italy’s real motive is to secure concessions on other issues.

Talks with the commission over the sale of Italian banks’ daunting inventory of non-performing loans are also bogged down. The urgency of the issue was underlined by a run on the shares of Monte dei Paschi di Siena, Italy’s third-biggest lender. Rome wants to guarantee minimum prices for the loans. But the commission has yet to rule on whether that would constitute state aid. Here again, an extra ingredient sours the mix: many Italian officials believe the commission applies EU rules less strictly to Germany.

The bad loans reflect more than a decade of stagnation and Italy’s slower-than-expected recovery from the euro crisis. In December, parliament in Rome approved an expansionary budget aimed at speeding the recovery. But it would also slow Italy’s reduction of its budget deficit and the repayment of its public debt, which in the euro zone is second only to Greece’s as a proportion of GDP. Mr Renzi’s ministers argue they are entitled to flexibility as a reward for structural reform, notably of the labour market. But Brussels may yet ask for adjustments. The budget’s centrepiece, a €3.6 billion ($3.9 billion) cut to taxes on first homes, looks more likely to woo middle-class voters than boost GDP.

The view in Berlin is that Mr Renzi’s belligerence is intended to burnish his image at home. The Italian prime minister’s personal ratings have fallen sharply since mid-2015 and in June he faces mayoral elections in several important cities. After a string of corruption scandals in Rome, there is a chance the capital could fall to the populist Five Star Movement (M5S).

This is where the issues at stake in Italy’s rows with the EU become fuzzier. Seen from the Italian government’s standpoint, Mr Renzi’s electoral interests and those of the EU are identical. The alternatives to his left-leaning coalition are either the intermittently euro-sceptic M5S, or a conservative government—led this time not by Silvio Berlusconi’s centre-right Forza Italia party, but by the virulently euro-sceptic Northern League and its populist leader, Matteo Salvini. Polls show barely half the population favours the single currency any longer. In an article this week in the Guardian, a British newspaper, Mr Renzi argued that EU austerity fuels the rise of his populist rivals. 

According to this view, self-interest would counsel the authorities in Brussels and Berlin to do all in their power to help Mr Renzi. That was also the view of Mr Renzi’s predecessor, Mario Monti. But whereas the urbane Mr Monti, a former EU commissioner, opted mostly for quiet persuasion (sweet-talking the German chancellor, Angela Merkel), the swaggering Mr Renzi likes nothing better than a scrap.