6
◼ AGENDA
● Thecountry’sproblemscanmostlybeblamedonits
politicians—buttheEUcanmakethingsworse◼BLOOMBERGOPINIONWrittenbytheBloombergOpinioneditorialboard ILLUSTRATIONBYBENEDIKTRUGARItaly’srenewedpoliticalupheavalcomesata badtimefor
theEuropeanUnion.Thelatestturmoilcouldalltooeasily
becomea full-blowneconomiccrisis—onethatmightnotbe
confinedtoItaly.There’snoquickwaytofixthecountry’s
politics.ButtheEUcan,atleast,avoidmakingmattersworse.
ThelatestalarmfollowsDeputyPrimeMinisterMatteo
Salvini’sdecisiontoendthecoalitionhisLeagueformedwith
theFiveStarMovement,whosepollratingshaveplummeted.
Salvinigambledthathecouldtriggera voteofnoconfidence
inthegovernmentofGiuseppeConte,anindependent,and
forceearlyelectionsthatwouldgivehispopulistLeague,now
pollingnear40%,whathecalls“fullpowers.”
Thegamblemayfail.ConteresignedonAug.20,leaving
PresidentSergioMattarellatodecidewhatcomesnext.Italy
facesbudgettalkswiththeEUtoavoidsanctionsforbreaking
therulesondeficitsandpublicdebt.Mattarellawillwantto
avoidanelectionduringthatprocess.A newcoalitionis possi-
ble,asis a newcaretakergovernment.Noneofthisoffersthe
claritythatItaly—andfinancialmarkets—wouldlike.
Howis theEUtorespond?Europeisn’ttoblameforItaly’s
economicproblems,butthebloc’sone-size-fits-allapproach
hashelpedthepopulistsshifttheblameforItaly’sstagnatingAvoidinganItalyCrisis
livingstandardsandotherproblemstooutsiders.Aspart
oflastyear’sagreement,Italyhadexpectedtoincreaseits
value-addedtax,whichcouldraise€23billion($25.5billion)
in 2020, or find other means if it missed budgetary targets.
Higher taxes for an underperforming economy with one of
the highest tax-to-gross-domestic-product ratios doesn’t make
much sense—and wouldn’t endear Brussels to Italian voters.
That’s the problem with the EU’s entire approach to fis-
cal discipline: Its instruments are blunt. Again and again, the
union’s policies court unintended consequences. Plenty of
countries, including France, Belgium, and Spain, have fallen
afoul of the EU’s Stability and Growth Pact, which was meant
to convince fiscally conservative Germany that high spenders
won’t get a free ride in Europe’s monetary union. Even if con-
sistently applied, its penalties would often only make things
worse. And the rules don’t sufficiently differentiate between
good and bad spending. The best way to defeat Salvini’s larger
argument is to admit he sometimes has a point.
The EU ought to accept Salvini’s argument for infrastruc-
ture spending, so long as the money is well-spent. (In the
past, it hasn’t been.) Europe should also ensure Italy isn’t left
to shoulder an unfair share of the burden of aiding refugees,
while resisting Salvini’s effort to undermine the wider com-
mitment to that goal.
Italy isn’t Britain—not yet, anyway. Italians feel integral to
the European project and know they have benefited from it.
The EU would be wise to avoid risking that and to remember
there’s more to solidarity than ticking budget boxes. <BW>TocommemoratetheoutbreakofWorldWarII, the
presidentheadstoPolandonAug. 31 forhissecondvisitto
a countrythat’sbecomehisstaunchally.Trumpcanceled
anotherlegofhistrip—astopin Denmark—afterthecountry
refusedtoconsidersellingGreenlandtotheU.S.▶TheU.S.revealsjobsdata
onSept.6, witheconomists
forecastinga dropin the
unemploymentrateto3.6%.
Butsignsofaneconomic
slowdownaremounting.▶Germanyholdselections
in twoformerlycommunist
easternstatesonSept.1.
There’sa goodchancethe
far-rightAfDwillmakegains
in theirlegislativebodies.▶TheEPA’sscientific
advisersmeetonAug. 27
todiscussa pendingrule
limitingthekindofscience
theagencycanusetocraft
regulations.▶Sweden’sRiksbanksets
itsinterestrateonSept.5.
Theworld’soldestcentral
bankhassaidit wantsto lift
borrowingcostslaterthis
yearorearlyin 2020.▶AttheIFAconsumer-
goodsexhibitionin Berlin
fromSept.6 to11,LGis
likelytounveila dual-
screensmartphonetorival
Samsung’sGalaxyFold.▶London’sNottingHill
Carnivaltakesplaceon
Aug.25-26.Labeledthe
biggeststreetpartyin
Europe,it’ssettodrawmore
than 2 million visitors.▶ Trump on a Delicate European Tour
Bloomberg Businessweek August 26, 2019