by Gwynne Dyer
From the European Union’s point of view, Brexit – the impending departure of the United Kingdom – is a pity but not a disaster. Britain never joined the euro, the common currency used by most EU members, and the English were always the awkward squad in the EU’s march towards an ‘ever closer union.’ Whereas the defection of Italy could threaten the EU’s survival.
Two and a half months after the election, Italy is finally getting a new government. It is a bizarre coalition of the Five-Star Movement (M5S), a populist party of the left, and the League, a populist party of the far-right. Moderates both in Italy and in the wider EU reassure themselves with the thought that it cannot survive, let alone cooperate, but they may be wrong.
There is actually a good chance that the new coalition will survive, at least for a while, because it is based on the ancient principle that ‘the enemy of my enemy is my friend.’ And the enemy the two parties have in common is the European Union.
Until recently, the leftist M5S was promising to hold a referendum on Italy’s membership in the euro, while the League was advocating outright withdrawal from the EU. They have backed away from those extreme policies for the moment, but what they are promising to do will nevertheless bring them into direct and severe confrontation with the European Union.
The coalition’s ‘contract for change,’ a joint programme agreed earlier this month, is a patchwork quilt of both parties’ favourite policies. It includes the M5S pledge of a minimum basic income of 780 euros ($917) a month for the poorest Italians, and the League’s demand for a flat tax of 15% on the incomes of middle-class Italians, and only 20 % even for the rich.
This will doubtless please a great many Italian voters (which was the whole point of the idea), but it involves an extra $132 billion per year of deficit spending. This blatantly violates the EU budget rules designed to keep the euro currency stable.
The Italian government’s foreign debt is already so big that only the implicit guarantee of eurozone membership keeps its borrowing costs down. A few more years of Italian over-spending, however, and the stability of the euro itself will come into question, so the EU will fight very hard to block the coalition’s spending plans.
That would seem to be enough dry kindling to get the fire going, and yet an open fight between the Five Star-League coalition and the EU will probably be postponed for a while. It will get kicked down the road because the EU needs all the unity it can muster to resist the US assault on global trade.
In the longer run, however, a major confrontation between Italy and the rest of the EU is coming if the coalition government lasts. When it arrives, the two parties that make up the coalition are quite likely to fall back on their previous plans for quitting the euro currency and even the EU as a whole.
The great majority of Italians want to stay in the EU, but their general discontent led many to vote for parties that are (among other things) anti-EU, and they can’t take their votes back.
It could turn into a perfect storm that unravels the European Union, but cheer up: Europe would recover some of its fine old traditions, like picturesque dictatorships, ultra-nationalism, sporadic wars, and maybe the occasional world war.