France’s finance minister fires EU budget warning to Italy
Bruno Le Maire says Rome needs to respect rules or risk jeopardising single currencycould
The French finance minister issued a blunt warning to Italy’s budding populist government on Sunday, saying that Rome needed to respect EU budget rules or the single currency would be in jeopardy.
The warning from Bruno Le Maire was immediately rebuffed by Matteo Salvini, the leader of the far-right League, which is poised to launch a Eurosceptic government in Rome alongside the anti-establishment Five Star Movement.
“This is another unacceptable pitch invasion,” he wrote on Twitter. “I didn’t ask for votes . . . to continue on a path of poverty, precariousness and immigration: Italians first!”.
After finalising an agreement on a common platform of fiscal expansion, a crackdown on immigration, and a shift towards Russia on foreign policy at the end of last week, Mr Salvini and Luigi Di Maio, the Five Star leader, met in Rome on Sunday to agree on a choice for prime minister, which they are due to present to Sergio Mattarella, Italy’s president, on Monday, for his approval.
“We hope no one will place vetoes on this person’s name or surname. We won’t accept it,” Mr Salvini said. “It won’t be me, nor Di Maio. It will be a balanced name that satisfies us both,” he said.
The intervention by Mr Le Maire reflects growing angst in eurozone capitals that the new Italian government could destabilise the single currency by implementing large tax cuts and spending increases that would sharply increase Italy’s budget deficits.
Italy has one of the highest debt ratios in the eurozone, at more than 130 per cent of GDP, which makes it particularly vulnerable to a sovereign crisis.
“Italians must understand that the future of Italy is in Europe and nowhere else, but there are rules to respect,” Mr Le Maire said in an interview on Europe 1 radio.
“If the new government takes the risk of not meeting its commitments on the debt, the deficit, but also the clean-up of the banks, it is the entire financial stability of the eurozone which would be threatened,” he added.
In their joint platform, Five Star and the League called for a sweeping review of Eurozone economic governance, calling it “asymmetric, and based on the dominance of the market compared to the broader social and economic dimension”.
A poll released on Sunday showed that most Italians are firmly behind Five Star and the League as they launch their government.
According to Demos, a polling firm, 60 per cent of voters had a “favourable” or “very favourable” opinion of a Five Star-League tie up, more than the combined 50 per cent that voted for the parties in the general election in March. Only 34 per cent of Italians were “opposed” or “very opposed” to the new government.
On Friday, Five Star asked its members to approve the new coalition through an online vote, receiving resounding support, with 94 per cent agreeing to the deal with the League. At the weekend, the League asked its supporters to back the deal in a vote held at stalls across the country.
The selection of the prime minister has been the subject of a tug of war between Mr Di Maio and Mr Salvini. Since Five Star clinched the largest vote share in the March election, it is expected to secure the post, but Mr Salvini has resisted allowing letting Mr Di Maio take it.
Huffington Post Italy reported on Sunday that Giuseppe Conte, a professor of public administration at the University of Florence, and Andrea Roventini, a professor of economics at Sant’Anna University in Pisa, were the other leading names under consideration.
“Only Di Maio and Salvini know the name,” one Five Star official said on Sunday.
Some analysts have estimated that the fiscal expansion planned by Five Star and the League could be worth more than €100bn, since the tax cuts and spending increases are laid out with only the vaguest plans to cover the costs with budget reductions elsewhere.
On Sunday, Five Star said in a blog post that sum needed to be distributed across the entire five years of the legislature, meaning the cost would amount to about €20bn to €30bn per year “in line with the previous government but with very different effects”.
It added that about €40bn would be taken in as revenue by cutting tax breaks, and about €30bn would be covered through cutting “wasteful spending”.
The rest would be financed by higher deficits, it said, adding that higher growth would help trim the additional cost.