Italy-EU honeymoon has just started, but needs to last

Italy's Prime Minister Giuseppe Conte, rings the bell that traditionally opens the meeting of the cabinet at Chigi Palace in Rome, Thursday, Sept. 5, 2019. Italian Premier Giuseppe Conte forged a new coalition government Wednesday that teams up the populist 5-Star Movement and center-left Democrats in an unusual alliance of rivals to banish for now the specter of early election that likely could have seen the triumph of Italy's fast-rising right-wing forces. (AP Photo/Domenico Stinellis)
265805 Pinchos- PGB promo Banner (25 x 5 cm)-5 copy

Italy’s new coalition government has been hailed as good news for Europe, as a more Brussels-friendly lineup replaces the populist coalition in which right-wing leader Matteo Salvini and his euro-skeptic League held considerable sway.

But unless European countries lend a strong hand to Rome on everything from budget constraints to migration policies, shifting course too abruptly could damage the coalition of the anti-establishment 5-Star Movement and the center left Democratic Party, or PD.

Salvini’s hardline stance toward Brussels still enjoys widespread support in Italy.

Political analysts note the newly-installed cabinet, with moderate and pro-Europe ministers in key posts, averted what Italy’s European partners perceived as a nightmare scenario: a League-dominated government which would have likely pushed Italy to a new confrontation with the European Commission over costly budget measures, just as Italy’s battered economy risks facing a new recession.

The uneasy 5-Stars-PD alliance was the unexpected result of Italy’s mid-summer crisis, which began when Salvini, then the powerful interior minister and deputy premier, pulled the plug on the coalition hoping to trigger snap elections and win the premiership.

The new cabinet has won praise abroad, starting with U.S. President Donald Trump, who endorsed Premier Giuseppe Conte, and future European Central Bank president Christine Lagarde. It has also reassured markets, with Italy’s borrowing costs easing from recent highs.

“The new government is likely to be more responsible in economic terms than either the previous one, or a cabinet led by the League,” said Luigi Scazzieri, researcher for think-thank Center for European Reform.

“While it has no appetite for fiscal tightening, and wants to change eurozone fiscal rules, it will be much less willing to pick a fight with the EU,” he added.

Scazzieri noted that if Europe gives Italy more leeway on its budget — which must be submitted to the Commission by mid-October and approved by the end of the year — and help it manage migration flows, it would not only “steal the League’s thunder,” but also foster a more pro-European stance within the 5-Stars.

The once euro-skeptic party has been gradually evolving over the past few years into a moderate political force. It has dropped its old call for a referendum on leaving the eurozone, and its new platform has converged with the PD’s on the need to strengthen Italy’s role in Europe while moving away from austerity measures that have hit the economy.

“Now we are strongly united over the idea that the EU has to be overhauled, not destroyed,” Tiziana Beghin, head of the 5-Stars delegation in the European Parliament, told AP.

She also stressed that the real game changer happened when, shepherded by Conte, the 5-Stars backed the election of the European Commission’s new head, Ursula von der Layen, isolating the League that voted against her.

The choice of Roberto Gualtieri, chair of the European Parliament’s economic affairs commission, as new economy minister, has also reassured international rating agencies and investors.

The EU is expected to provide him more wiggle room as he drafts a complex budget that needs to avert a painful and unpopular 23-billion euro ($25 billion) sales tax hike. The VAT increase was introduced by the previous government and is set to go into effect next year unless the current government can raise the funds otherwise.

The new Italian candidate for the Commission, former premier and foreign minister Paolo Gentiloni, is also poised to get an important EU portfolio, possibly the economic affairs or the competition post, in what would be seen as the strongest endorsement to Italy from European partners.

Gentiloni met von der Leyen for one hour on Friday in Brussels, as the process to form the new EU cabinet, to be unveiled on Tuesday, still seems wide open.

The risk, however, is that the 5-Stars-PD government could become just a brief interlude before the League returns to power at the head of a right-wing coalition that would start a new war with Brussels.

The Democratic Party and the 5-Stars are likely to keep fighting over key policies, as their coalition agreement contains broad promises that still lack key details.

“It would be very unwise for them to underestimate Salvini’s chances to come back and win big if new elections are held soon,” said Francesco Cherubini, professor of EU Law at Rome’s LUISS university. “It’s both in the EU and the Italian government’s interest to try to keep this honeymoon alive.”q