Monday

25th Jun 2018

Nervous Brussels urges Italy to stick to austerity

  • All eyes are on Rome where government negotiations are expected to be lengthy (Photo: Giampaolo Macorig)

The European Commission has urged any future government in Italy to keep on implementing deficit-cutting measures, despite the fact that over half the electorate voted for anti-austerity parties.

"Last Friday the Italians were speaking quite clearly about debt-reduction commitments as well as a series of other commitments. These Italian commitments remain in force and the commission expects compliance," commission spokesperson Olivier Bailly said on Tuesday (26 February).

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His comments come after elections in Italy - the eurozone's third biggest economy - failed to result in a majority for the upper house of the country's parliament.

The centre-left coalition of Pier Luigi Bersani, who had pledged to continue Monti's work, won the lower house by a whisker.

The resulting stalemate has put former comedian Beppe Grillo, who ran on an anti-austerity ticket and has called for a referendum on euro membership, in kingmaker position. It has also rattled Brussels.

The commission's Bailly referred to Italy's European duty as a "major founding member of the EU." He said Rome sticking to its reform promises would underpin confidence in the euro currency.

But he admitted that Monti's reform path had yet to produce results.

It would be "an illusion" to think that 15 months of reforms - Monti took over in November 2011 - would would lead to "joy, happiness and jobs." Staying with austerity would eventually lower debt, which is a "brake" on growth, he added.

Italy's public debt is expected to hit 128 percent of national output this year.

There were similar messages elsewhere. Eurogroup chief Jeroen Dijsselbloem said Italy's reforms are "crucial" for the entire eurozone, while Guido Westerwelle, the foreign minister of pro-austerity Germany, said Rome must "continue the solid policies of reform and consolidation."

Others worried about the political implications of the vote.

European Parliament President Martin Schulz noted that "what happens in Italy affects all of us."

He said that unpopular reforms are being associated with the EU capital.

"I take it very seriously that a lot of Italian people expressed a kind of protest against measures which are [seen] in Italy publicly as measures of the European Union. We should here in Brussels take this very, very seriously," he explained.

Meanwhile, the Italian post-election political riddle is unlikely to be solved soon.

While several politicians have indicated that new elections would not be the best path, government negotiations are expected to be torturous.

Italian president Giorgio Napolitano is set to officially start consultations with the various political parties on forming a government in about three week's time.

Italian President demands respect in Germany

Italian President Napolitano has, while on a trip to Germany, demanded respect for Italy and cancelled a meeting with the German opposition leader after he mocked election results.

Agenda

Italian mess dominates this WEEK

Post-election wrangling in Italy and its implications for the euro crisis will dominate events this week, alongside the Cyprus bailout, bankers' bonuses and Hezbollah.

Opinion

Why Europe should not worry about Italy

While seemingly a threat to EU stability and at the heart of possible contagion, Italy is historically used to navigating through uncertainty, short-lived governments and catastrophic economic forecasts.

Merkel shows softer side on Italian holiday

Germany's Angela Merkel - for many the incarnation of EU austerity and German rigour - has shown her softer side by visiting a waiter who lost his job.

Analysis

Greece facing post-bailout challenges

Creditors are expected to agree Thursday on a final loan and debt relief measures for Greece. After eight years on an international lifeline, the country will remain under close surveillance - but will have to find a new economic model.

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