Populism is Popular in Italy -- Brussels is in Trouble
For years Italy’s Northern League kept to itself, being focused on secession rather than reform from within. That change began last year with their non-binding referenda to petition Rome for more fiscal autonomy. But, as the Italian parliamentary elections come into view, the Northern League is playing politics.
And doing it well.
Having made a coalition with Silvio Berlusconi’s Forza Italia and two smaller center-right parties, the Leag Norda (Northern League) is now in a great position to win the election. It’s leader, Matteo Salvini has wholly embraced populism and is now in open opposition to Europe as a whole.
From a report at Breitbart:
During a heated interview with Italian TV Channel Rete 4 this week, Mr. Salvini reaffirmed his eurosceptic credentials, blasting: “Europe can go f*ck itself!”
“Europe has been punishing us for the last 15 years and we are worse off than 15 years ago,” he added. “European measures are the last thing I am interested in.”
Salvini’s populist stance goes much further than that. His Twitter feed reads like Nigel Farage’s after a lengthy stay at the pub. He’s pushing for a 15% flat tax, the bane of the Progressive left who understands that a progressive tax system is the biggest obstacle to wealth generation. Salvini invokes U.S. President Donald Trump whenever he can especially on defending Italy’s borders and EU immigration policy.
It Italy elects a government hostile to Angela Merkel’s open immigration policy she will have no choice but the back down on her stance against the Visegrad nations – Hungary, Czech Republic, Poland, Slovakia.
But, the big question it the euro. And where does this new coalition and Salvini really stand on taking one of the lynchpin economies out of the failing monetary union? Honestly, we don’t know.
Polls suggest that anti-euro sentiment is still not high enough for it to be a winning electoral strategy. Even the front-running party, Five-Star Movement, is backing off rhetorically on its most radical position, calling a referendum on the euro a ‘last resort’ now.
But, this isn’t 2015 and Salvini isn’t the feckless idiot that Alexis Tsipras in Greece is. The Leag Norda comes for truly radical roots. It understands the problems Italy has stem from Germany’s punitive ideas on austerity.
He directly discusses them in his stump speeches and Tweets. So, a lot of this softening on the euro is simply campaign strategy to get elected. Is it also a means by which to blunt the rise of Five Star Movement and shut them out of the government?
Absolutely. And in that respect one has to be skeptical if this embracing of populism isn’t just another ruse. If a member of Berlusconi’s Forza Italia was the face of the coalition then I would be more circumspect, but because of Leag Norda’s secessionist roots, I have to believe that this move to challenge Brussels on tax and spending policies is real.
The problem lies with the polls. Five-Star is in the lead but like Alternative for Germany (AfD) in Germany no one wants to make a coalition with them. It would be like the Republicans making a coalition deal with the Libertarians here in the U.S. It seems like a natural fit to outsiders but it’s not because the radical outsiders are a threat to the power of the entrenched players.
And that, I think, is the likely dynamic here.
Either way, though, Leag Norda becoming a real political force in Italy spells real trouble for a European Union and the Troika. Salvini is advocating the opposite of the plans favored by the power elite in Europe.
Cut taxes, stop immigration and bring the Italian middle class back into the mix. The problem is that Germany favors a strong euro over a weak one. It gives them a massive advantage over the rest of Europe. It drastically over-values non-German European labor on the open market, retarding investment and trade. While Germany’s industrial base is strengthened comparatively.
And so, Salvini and Berlusconi, if they win, will have to then sell this idea of Germany using the euro to trap Italy, like Greece in a death spiral, for the next generation if not longer.
And it is an easy sell on the campaign trail and will be an even easier sell once elected.
Veneto and Lombary are some of Italy's wealthiest regions, with strong agriculture and manufacturing economies. Isn't it telling that their ire has been, historically, directed at Rome rather than Brussels? Most of their customers are other Europeans, not Italians, and given power in Europe I suspect they'd opt to impose austerity on their southern countrymen, not risk their access to markets.
If by austerity you mean withholding taxes from the southern regions, then yes. But, at the same time, they wouldn't lose access to the EU markets if they left the euro... though the EU would threaten and bluster all day every day about that. Moreover, reimposing the Lira would lower the cost of those products to sell to an over-priced euro-zone as well as the rest of the world.
The euro is strangling Italy at this point and that, frankly, has always been the plan. The Northern League has been openly secessionist for more than a decade on this very issue. They know that their customers in Europe will still buy their stuff. It will be Brussels that will have a hissy fit, but Brussels is very vulnerable right now, given that the ECB is literally the only buyer of Italian debt.
And that problem is the ECB's problem, not the Bank of Italy's. When you owe the bank a thousand dollars it's your problem, when you owe the bank 300 billion dollars? that's the bank's problem.
I think it's obvious to most that many EU countries are moving away from the German vision of the EU, but as you mentioned above, in the case of the Vicegrads they aren't necessarily all moving in disparate directions. Most of the skeptics, me included, think break-up is inevitable, but for the fun of it are any of these situations possible? A. Blocs form their own (Eastern) EU, B. France plays ball with the Blocs (or Italy + France) to wrest control from Germany, C. Germany folds on immigration to maintain status quo, D. We're all just Russian puppets trying to sow discord
I think the most likely scenario is that the south breaks off because it's in their interest to do so. And the Euro becomes a northern eruopean currency bloc because that's where the comparative advantages of each area are aligned.
The least likely scenario, because Germany will never fold on this issue, is to consolidate all of the debts of the Euro-zone into the EU itself and have the ECB be the only issuer of euro-denominated debt.
The time to do this was about 25 years ago.
Germany is already folding on immigration, but still wants to use the politics of it to hammer the Visegrads over the head with it. I don't think it will work... because the major ones retained their own currencies.
And, from my perspective, you have scenario D backwards. Russia wants nothing more than an end of the use of monetary and foreign policy to subvert its re-emergence as an economic engine. Russia's issues are with the power structures in both the EU and the U.S., not with Europeans or individual countries.
The problem is the intensity with which both Americans and Europeans have been gaslighted on this issue many can't see this. And Germany is trying to play both sides to get cheap Russian gas to run its industries and control its flow back to states like Poland and grind them under its heel.
Germany's politicians, in my mind, are the freaking problem, and the German people are beginning to see it for what it is.
Great discussion, BTW. Enjoying this. :)
Certainly better Saturday morning than watching Netflix in chilly Chicago!
What a perfectly concise way of describing that.
That pretty much sums up the entirety of US/China economic relations too doesn't it?
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