1 February 2016

Grexit, Brexit… could Itexit be next?


As the 2017 referendum approaches, and Cameron’s negotiations become more and more preposterous, hardly a day passes without someone speculating on the consequences of Brexit, for Britain and for the EU. But no one is thinking about who might be next. Could it be Italy? There is a case to think so.

This month, the Italian press became rather hyped up over the skirmish between Prime Minister Matteo Renzi and President of the European Commission Jean-Claude Juncker. Passive aggressive comments and rather childish finger-pointing were exchanged, culminating in Juncker lamenting the insubordination of Renzi, guilty of wielding his veto power and criticising the Commission. How dare he.

The official cause of the debate concerned the provision of €3bn to Turkey – a combination of funds from the EU and national governments – in the hope of managing the refugee flow. However, it quickly became clear that the conflict between Italy and the Commission runs deeper, and is fuelled by Europe’s fear of the Greek tragedy repeating itself.

In 2015, debt-ridden Italy was allowed to ease the pressure on the debt reduction program mandated by the EU, in order to implement structural reforms and attempt to boost its somnolent economy. Whether such reforms will work is relatively unimportant: what Europe is striving to avoid at all costs is for the (non-elected – but that is another story) Italian government to fall. The EU simply cannot afford to let this happen. Hence the relative period of “grace”, accorded to Renzi, and the approval of his structural reforms.

However, the peace between Brussels and Rome may have come to an end, by Juncker’s own admission. Manfred Weber, German MEP for the European People’s Party joined in by accusing Renzi of populism, and of “compromising the international strength and credibility” of the EU. This is significant, as Italy (or rather, the Italian government) has always declared its deep commitment to European federalism.

Communication between Italian MEPs and the electorate are historically poor. The detachment between European politics and people’s lives could not be more evident. But it isn’t just that: indifference and apathy are turning into resentment. And Matteo Renzi might have just started to take this matter seriously.

Italy is a divided country (my opinion, incidentally, is that it shouldn’t have been unified in the first place) and certainly, Italians disagree on a plethora of issues, but, increasingly, not on the EU.

There are several reasons why the EU is unpopular among Italians. Many of these resemble the general discontent breeding among other European citizens, in particular the harsh austerity measures and the inconveniences caused by the currency union.

There are, however, a few reasons why the EU is specifically bad for Italy.

First, the (terrible) handling of the migrant crisis, which Italy has had to face for much longer and at a much higher cost than any other European country, and which has left the Marine Guard helpless and the government ridden with even more debt. Even the PM’s appeal in his best English in The Guardian was of little use to the cause of Italy: EU’s legislations such as those prescribing that refugees must appeal for asylum in the country where they first set foot have never proved advantageous for Italy. Crucially, few European leaders responded to Renzi’s cry for unity and support. (It seems the Union is only ‘Ever Closer’ when it wants to be.) For the reputation of the EU, this has been a disaster: from volunteers helping in refuge centres to lunatics inflamed by a rhetoric of racial hatred, everyone agrees that Europe’s management of the migrant crisis has been abysmal.

But there is more to that. Supposing that Italy is not completely devoid of economic potential, the EU has done virtually nothing – directly or otherwise – to develop it. This is at least the feeling one gets when speaking to the few entrepreneurs left in Italy, a group that led Italian growth in the post-war period and constituted the backbone of the Italian manufacturing until the 80s. To them, the EU has prompted a struggle for survival.

In the past few years, the focus of the European Union has shifted from a commitment to market openness, competition and investment towards the implementation of common regulations and the harmonisation of the financial market. This has hit Italian entrepreneurship hard, especially through the introduction of agricultural regulations such as milk quotas, restrictions on regional products which fail to meet arbitrary European standard, and legislation that generally undermines the diversity and territorial specificity of the Made-in-Italy.

The winemakers and carpenters from Tuscany, the manufacturers from Venice, and the Northerner cheese producers I had a chance to talk to while travelling around Italy all agreed on one thing: that the despotic attempts of the EU to regulate markets are seriously jeopardising their businesses. Having backed the EU in the hope to gain access to international markets and supply the products that Italy is famous for, they now feel betrayed, alienated – and broke.

The bureaucratic, heavily-regulated, clogged European market has done nothing good for Italy, and the hypocritical unionist project hasn’t made Italians any more favourable towards MEPs and Commissioners. The implementation of so-called “liberal” large-scale policy has had results that no liberal could wish for: reduced consumer choice, weakened competition, and no incentive to specialise.

It would not be surprising, then, if a new financial crisis strikes, that tensions between Brussels and Rome further aggravate.

Nonetheless, it is still too far a stretch to think that Renzi will decide to follow Cameron’s path and embark in a palaver of negotiations and reforms. Italy is tangled in the Eurozone. To leave it and try to implement a parallel currency system, given the current state of the Italian economy, would equal a political, social, and financial suicide. The stakes are just too high.

It should also not be forgotten that the EU funnels every year billions of euros to the poorer, dysfunctional and crime-ridden South of Italy. Regardless of the real utility of such funds – sources disagree on the destination, but it is common understanding that they mostly go to waste – Italy simply cannot afford to maintain the South alone.

Moreover, it is unlikely that Italy will be made to leave, regardless of how many German MEPs and Commissioners have a pop at Renzi. Greece, somehow, was kept in, and so will Italy in the foreseeable future – albeit bad, its situation is not as dramatic as to pose a serious threat to the Union.

But, really, one never knows. And if the moment comes for the “out” campaign to leave the British shores and land in Italy, I will be prepared. Hashtags always come to handy these days, and I am in the lookout for something snappy: #itexit? #exitaly? Suggestions are welcome.

Beatrice Faleri is Senior Editor of Perspectives at King’s College London.