Italy’s Five Star Movement and (formerly Northern) League are on the verge of forming a government.
In my latest blog post for the Atlantic Council, I argue that such a pact would pose three challenges to the EU, two in the short term, one in the medium term:
- Spending: The parties want to cut taxes, introduce a €780 monthly basic income for poor families and repeal the 2011 pension reforms that raised the retirement age and made the system sustainable in the long term. They may not make good on all of these pledges, but any one could cause Italy’s deficit to rise over 3 percent of GDP, which is the EU maximum. The European Commission will then have to decide whether to relax the rules for Italy or give it a fine.
- Russia: Both parties campaigned for East-West rapprochement. Their coalition agreement calls for the lifting of EU sanctions on Russia.
- EU reform: Italy was French president Emmanuel Macron’s best ally for EU reform. Now he is left with Spain and smaller nations, such as Belgium and Portugal. EU reform may still happen; some proposals have been embraced by the European Commission and, once they are in the institutional pipeline, they are hard to stop. But they won’t be of the scale Macron dreamed of.
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