New government in Italy: A warning for the whole of Europe

8 June 2018 – Les Echos (Paris)

If it’s likely that Italy’s new populist government, confronted with reality, will eventually step back from its economic adventurism, its mere existence should cause reflection among European leaders on the return of identitarian tropism, writes financial analyst Edouard Tétreau.

“La situazione politica in Italia è grave... ma non è seria.” These days, here in Rome, people like to repeat this aphorism of Ennio Flaiano, an Italian journalist and author from the 60s, and a friend of Fellini.

Yes, the situation is grave: power is now in the hands of an unlikely alliance of the extravagant humorists of the 5 Star movement and the industrious right-wing nationalists of the Ligue, concerned with financial orthodoxy and security in a heavily indebted country submerged by waves of migration (700,000 migrants have arrived since 2013, 90 per day over the last five months). Violent slogans against migrants proliferate (“pack your bags”), as do witch hunts (a ban on freemasons participating in government), and promises to consume public finances with a program that would bring a smile to Mélenchon, Maduro et al.

The situation is therefore sufficiently grave to worry Europe and the markets: in less than a month the country’s 10-year bond yield rose by 0.75 percent. With authentic jubilation, Anglo-saxon agencies and brokers dusted off their most apocalyptic scenarios for Italy, the “new Greece” which the EU cannot save, from the magnitude of its debt (2,400 billion euro), the announcement that the ECB’s support program will soon end, and the increasing hostility of Italy’s European partners, with Germany at the forefront.

The situation is grave, but not serious, for at least three reasons. Firstly, a statistical and historical reality: post-war Italy has had 67 governments in 72 years. Governments come and go, clamorous slogans and declarations too; the facts, on the other hand, remain. Italy, despite all its ills, remains the world’s 8th greatest economic power, with a positive budgetary primary balance, an unequaled patrimonial wealth – which they can always tap in case of emergency – and it has also managed to maintain genuine conditions of familial and intergenerational solidarity.

Secondly, your columnist bets his weight in tomme de Savoie that this government won’t last for even a year. Reality will get the better of this unnatural alliance between two incompatible populisms. The justice of the peace will once again be the euro and Italians’ defence of their wallets.

It’s one thing to lob incendiary words and slogans at a multitude of scapegoats; it’s another to abandon the euro: consultancy firms estimate that an exit from the euro would cause a currency devaluation of at least 30 percent, and therefore have a drastic effect on Italians’ purchasing power. And none of Italy’s partners in Europe, even less the ECB or the markets, will let the country generate 100 billion supplementary annual expenses, all while keeping the lending rate of Germany or France.

In a matter of weeks, or months, the Conte government will implode, or, like the Tsipras government in Greece, will be obliged to deal with reality and its attendant constraints.

But this episode reveals a more grave and more serious situation: the disintegration, under our very eyes, of the solidarity and union of Europeans at a time when Europe faces existential threats. Opportunities for European unity have hardly been lacking over the last ten years: from the American subprime crisis in 2008, adeptly transformed into a euro crisis by the United States, to the declarations of commercial war by the Trump administration against America’s allies, from Canada to Europe; from China’s industrial and military expansionism, under the cover of new silk routes, to the burgeoning migratory flow towards Europe.

Now, over the last ten years, with the notable exception of Emmanuel Macron’s France, the countries of Europe are tilting, one after the other, towards the reaffirmation of nationhood and every man for himself. Even the very open and mercantile Great Britain, which a certain bien-pensance in France would struggle to charge with “illiberalism”, has chosen “Britain First”, regardless of the economic cost.

In a 21st century in which nations reaffirm their identities and their individual characters, even at a high economic price – which are retrograde, and which are modern: the elites who refuse to look this reality in the face, and continue to play the game of open society in a world which is closing its doors? Or the populations who balk when taunted by the acceleration of changes in all domains, from bioethics to the economy? “Stop”, they say. Following the example of Italy, the country which most resembles us, and has been singularly ahead of France in its political cycle (Berlusconi-ism heralding Sarkozy-ism; Monti, Letta and Renzi heralding Macronism), the people are looking for safeguards and centuries-old reference points: the nation and the family, in the ‘traditional’ model.

By denying these realities, and in their expression of a certain technocratic arrogance, Barack Obama and the Italian centrists contributed to the emergence of Trump and Salvini in their respective countries. Without denying his open and European positioning, which is only reasonable, the challenge now facing Emmanuel Macron is to take into greater account these reasonable demands for the protection of our identities – before they become deeply unreasonable.

Translated from the French by Ciaran Lawless

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