Rome plays the long game with Brussels

Italy’s response to pressure from Brussels over its budget may be better orchestrated than it appears.


The European Commission has found itself shadow boxing with the Italian government as different ministers send mixed messages about the country's budget plans. Brussels has rejected Italian proposals to run a 2.4% budget deficit next year and announced last week that it is considering disciplinary action that opens the way to multibillion-euro fines.

Five-Star leader and deputy prime minister Luigi Di Maio and economy minister Giovanni Tria both indicated this week they are open to tweaking the budget, temporarily calming markets. Yet on Monday the country's prime minister Giuseppe Conte and deputies Di Maio and Matteo Salvini of the League party said that the objectives for the budget had "already been fixed".

Subscribe to MoneyWeek

Become a smarter, better informed investor with MoneyWeek.

In apparent imitation of the Brexit pantomime, Rome has put on its own "surreal piece of theatre ahead of the festivities this year", says Ferdinando Giugliano for Bloomberg.

The theme? A "servant of two masters". PM Conte has been shuffling back and forth between the Commission in Brussels and his populist masters in Rome. Yet the proposed budget is still full of "irresponsible giveaways", such as a lower pensions age, that are not so amusing.

Advertisement - Article continues below

The trouble is that the right-wing Salvini and the left-leaning Di Maio "might be happy to cut the other's preferred promises, but not their own". At least Salvini has struck a more conciliatory tone as he tries to extract concessions from the EU. Perhaps "recent struggles with debt issuance" have "concentrated populist minds".

Italy's response to pressure from Brussels and the markets may be better orchestrated than it appears. Talk of compromise might be a "ploy" to keep the spotlight off Italy's sovereign debt, CMC Markets analyst David Madden told City AM. Di Maio and Salvini may be playing a long game, distracting investors with conciliatory words while working to pass the budget in parliament.




How long can the good times roll?

Despite all the doom and gloom that has dominated our headlines for most of 2019, Britain and most of the rest of the developing world is currently en…
19 Dec 2019
EU Economy

The European Central Bank throws away the rulebook to bail out Italy

The ECB has removed all constraints on asset purchases and will now buy “whatever it takes” to tackle the coronavirus. John Stepek explains what it me…
26 Mar 2020

The euro: will the single currency survive the coronavirus?

The EU has failed to convince anyone that it has either the will or the tools to keep the eurozone together in the face of the coronavirus epidemic.
20 Mar 2020
EU Economy

Get set for the next euro crisis

Italy is almost certainly heading for its fourth recession since the global financial crisis. 
13 Mar 2020

Most Popular


Three things matter for the UK housing market now – and “location” isn’t one of them

The UK housing market is frozen. And when it does eventually thaw out, the traditional factors that drive prices will no longer apply. The day of reck…
1 Apr 2020

Has the stockmarket hit rock bottom yet?

The world's stockmarkets continue on their wild and disorientating rollercoaster ride. Investors are still gripped by fear. So, asks John Stepek, have…
2 Apr 2020

What does the coronavirus crisis mean for UK house prices?

With the whole country in lockdown, the UK property market is closed for business. John Stepek looks at what that means for UK house prices, housebuil…
27 Mar 2020

Oil shoots higher – have we seen the bottom for the big oil companies?

Just a few days ago everyone was worried about negative oil prices. Now, the market has turned upwards. John Stepek explains what’s behind the rise an…
3 Apr 2020