Silvio Berlusconi was famously derided for claiming in the aftermath of the Great Financial Crisis that all was well in Italy as the restaurants were as full and the beaches as crowded as usual. Subjective as these ‘indicators’ may be, I have over the years found them the saddest confirmation of Italy’s economic decline. Most of my frequent visits are spent in Rome, which seems to be fuller of tourists (especially from Asia) than ever, but even here there are permanent sales in the shops, including upmarket brands. July used to be almost as important a holiday month as August but even the wonderful beaches near Rome are only crowded on Saturdays and Sundays. Eight years on, Mr Berlusconi’s remarks ring hollower than ever.
No surprise therefore, that many Italian voters have decided to give a new set of politicians a chance to do things differently. Expectations are low but tempers are running hot. There is almost universal support, albeit accompanied by much nose-holding, for the aggressive defiance of Matteo Salvini, Vice-Premier and leader of the nationalist Lega. As Interior Minister Mr Salvini has raised the stakes by refusing automatic permission for ships that rescue migrants at sea to put them ashore in Italy: accusing charities of bounty-hunting and the Mafia of muscling in on people smuggling.
Migrants have hitherto received a remarkably friendly reception in the much poorer provinces of Southern Italy but most of them have been keen to travel on to the richer North and beyond. This has created such tensions within the German Government that all the EU countries (apart from the Visegrad bad boys, who were not asked) rallied round Mrs Merkel to support vague proposals that effectively mean migrants will be returned to Italy.
Other EU members did not agree to open up their ports to boats previously bound for Italy, or to implement a compulsory redistribution mechanism or to host ‘controlled centres’ on their territory, with French President Emanuel Macron and Spanish Prime Minister Pedro Sánchez specifically rejecting the latter. With friends like that, the Italians have been stepping up their unilateral attempts to keep the flow of people on the other side of the Mediterranean, including possibly resurrecting a $5bn deal that Mr Berlusconi tried to put in place before the Gaddafi regime was overthrown and which the European Court of Human Rights had ruled against. Almost inevitably, Italy and France are backing different forces in Libya.
‘No more Mr Nice Guy’ has never been appropriate to apply to Mr Salvini’s politics and yet another of his slights to Mrs Merkel is his enthusiasm for Vladimir Putin and for ending EU sanctions on Russia, which have cost Italy’s exporters dear. Meanwhile on the domestic front, the new government is pressing on with tax and basic income policies in defiance of the Euro Area’s fiscal rules and is still mulling over introducing a new debt instrument that could be regarded as a parallel currency in conflict with the ECB. The German Constitutional Court has already warned that it has reached its limit on approving participation in ECB and EA financial schemes.
The ECB’s internal accounting Target 2 system shows that the Bank of Italy’s owes other EA central banks some €440bn while the Bundesbank is owed almost €1tn by the others. This is only partly due to the ECB’s huge QE programme and also reflects that Italy imports more than it exports to Germany while under the Target 2 System the Bank of Italy never has to settle the bill. We can be sure the populist AfD (now overtaken the SPD in the opinion polls) and the semi-populist Bavarian CSU will be shrieking ‘Transfer Union’ louder than ever. In fact, Italian recalcitrance is a much bigger threat to either Brussels Federalism or French Imperialism even than the defiance of Poland and Hungary on civil rights (as well as migration) or the growing assertiveness of a new Hanseatic League (Netherlands, Nordic and Baltic countries). EU Commission President Juncker notoriously justified condoning French breaches of EU rules on the grounds that ‘France is France’.
Well, now he is finding out that the Italian Government cares very little for what Brussels, Paris or Berlin think even if a large majority of Italian voters do not wish to leave either the EA or the EU. At the very least the row over migration could soon lead to the suspension of the hallowed Schengen Agreement on cross-border movement.