HIGH NOON FOR THE EU AND ROME

October 10, 2018 by Gabe Lipton

Italy and the EU are on a collision course. After unexpectedly sweeping to power in elections earlier this year, Rome’s populist-led coalition government has committed to drastically increase government spending next year, in part to deliver on outsized promises made during the campaign.

A budget proposal making its way through Italy’s parliament would see the country’s deficit balloon to 2.4 percent of GDP, three times the previous government’s projection. But with a debt load over 130 percent of GDP, more than twice the limit proscribed by EU rules, Rome can hardly afford to be loosening the purse strings.

Next week the government will officially submit its proposal to the European Commission, which is responsible for certifying EU members’ compliance with collective spending commitments. Brussels has already begun to sound the alarm bells, and the European Commission may well take the unprecedented step of sending the budget back to Rome for reconsideration.

Such a step would set up a big and protracted fight between the EU and the bloc’s fourth-largest economy. Italy’s caustic far-right deputy prime minister, Matteo Salvini (pictured above), is gearing for a fight. On Monday, Salvini delivered a biting speech in which he called the EU’s top officials “enemies of Europe” and promised not to back down.

For Brussels, there are no good options—a decision to push back forcefully risks further inflaming populist sentiment in Italy, while a failure to react could spark a backlash in Europe’s wealthier northern countries, which view Rome as a perennial mooch. The inevitable collision will further deepen Europe’s political divides at a moment when it already has its hands full with Brexit andgrowing illiberalism on its Eastern flank.