First Brexit, now Italy – the EU power balance is shifting

Finally, over two months after they went to the polls, we have a new government in Italy, and a candidate to be the next Prime Minister.

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تاریخ: ۰۲ خرداد ۱۳۹۷ - ۰۸:۳۹

From a British perspective, 11 weeks might seem like a long time to form a new administration – although the 18 days it took Theresa May to agree a confidence and supply arrangement with the DUP also felt like an eternity last year.

But the Italian coalition negotiations were actually speedy from a European perspective. It took Angela Merkel five and a half months to form her grand coalition after last September’s German election, and Mark Rutte spent seven months of 2017 finding a viable coalition in the Netherlands – a record-breaking 208 days.

So when Italy’s new Prime Minister attends his first European Council meeting, he should not feel embarrassed by the length of time it took the far-left Five Star Movement (M5S) and the far-right Northern League to form a coalition.

And the fact that neither the M5S’s 31-year-old leader Luigi Di Maio nor the League’s 45-year-old Matteo Salvini wished to become Prime Minister was the final twist in an extraordinary election. We will find out in the coming days if their mutual pick for PM, law professor Giuseppe Conte, is successfully confirmed.

Italy’s debt is already the second-largest among EU countries at 130 per cent of GDP, roughly €2.3 trillion, so the new coalition’s first budget will certainly be interesting.

The left-wing M5S has campaigned for a universal basic income, while the right-wing League has proposed a flat tax of 15 per cent to reduce middle-class taxation. But one thing they agree on is the EU’s responsibility for Italy’s fiscal problems.

Di Maio has channeled public anger at the “austerity” policy the EU has forced on Italy, while Salvini has advocated simply ignoring the three per cent limit on budget deficits imposed by the Eurozone’s Stability and Growth Pact.

Both want to renegotiate the EU treaties, agree a reduction in Italy’s contribution to the next EU budget, and seek debt relief of €250bn from the European Central Bank.

Their success as a government will hinge on their ability to negotiate with the EU to get the debt ceiling lifted. If they can’t, with the unusual cocktail of domestic policies being proposed, Italy risks becoming the next Greece.

That said, there is a natural inertia to Italian politics. Moreover, the coalition will be acutely aware that member states rarely come off better from head-on clashes with the EU. Italy might well be browbeaten, just as Greece was.

What’s perhaps more interesting is the effect of a more eurosceptic government in Italy, combined with Brexit, on voting in the European Council.

Not enough attention has been given to how the UK’s absence from the EU will change the balance of power, especially on matters decided by Qualified Majority Voting (QMV).

A blocking minority under the QMV procedure needs to consist of at least four member states, representing 35 per cent of the EU’s population. This veto is normally only achieved when endorsed by one or two of the four biggest nations. For Italy, the third largest member post-Brexit, this means a significant increase in power.

Back in March 2015, the think tank Open Europe published an intriguing report entitled “What if…? The consequences, challenges and opportunities facing Britain outside the EU”.

The authors looked at the possible implications of the UK’s exclusion from EU deliberations on their trade policy post-Brexit. They split the EU into a Free Trade block – which included the UK, Ireland, Germany, the Netherlands, Sweden, Denmark, Finland, and the Baltics – and a Protectionist block of France, Italy, Spain, Greece, Portugal, and Cyprus.

With the UK voting, both the Free Traders and the Protectionists have a blocking minority. Without the UK, only the Protectionists have a blocking minority – and a significantly larger one (35 per cent of the voting weight) than before Brexit.

Open Europe explored what this might mean for the prospects of a liberal UK-EU trade deal.

It also has implications for the EU’s trade policy more generally, future economic policy, and a whole range of other issues. And the new government in Italy complicates matters further.

Much has been written about the problems facing the EU post-Brexit, from east-west tensions over migration to north-south tensions over the budget, to the Eurozone’s structural weaknesses and the prospect of an Italian banking crisis.

More attention should be given, however, to the rather mundane, perhaps even arcane point about what Brexit and the various recent changes in EU27 governments mean for the balance of power in the bloc’s institutions.

It’s a less exciting story than whether the first populist, eurosceptic government will bring down the EU, but it’s at least as important to predicting the future of Europe.