Italy is a lot like Turkey in that when it comes to where things are headed, you only have yourself to blame if you refuse to read the writing on the wall.
Matteo Salvini is destined to define Italian politics for years to come and that is not a good thing. Salvini is a belligerent xenophobe with an unswerving nationalist streak and he’s popular. Very popular. His charisma and bellicosity go a long way towards explaining how he’s managed to move League into poll position (figuratively and literally) ahead of potential new elections.
He lost the Armando Siri battle, but that could backfire on his rivals. Salvini now has another excuse to be angry with Five Star’s Luigi Di Maio, and thanks to Giuseppe Conte’s support for Siri’s ouster, he (Salvini) can argue that the Premier is a meddlesome irritant.
Salvini’s celebrity is growing alongside his popularity and he’s poised to assume the de facto leadership of the far-right nationalist movement in Europe. He doesn’t come with the same baggage as Marine Le Pen or Viktor Orban and the fact that Italy is perpetually teetering on the verge of a debt/financial crisis with serious ramifications and possible knock-on effects for the rest of Europe, means Brussels has no choice but to deal with him.
The amusing thing about Salvini is that he doesn’t even pretend to care about fiscal targets and ostensible constraints imposed by “eurocrats”. He’s not so much a “rogue” as he is an asshole, which means that when he talks about fiscal rules, there’s no ambiguity. He’ll comply or not comply according to what he thinks is necessary or expedient – and that’s just all there is to the discussion.
Take Tuesday for instance. Here’s what Salvini told reports when asked about adherence to EU budget rules in the context of League’s domestic priorities:
If we need to break some limits, like the 3% (deficit-to-GDP ratio) or 130-140% (debt-to-GDP ratio), we’re ready to go ahead. Until we arrive at 5% unemployment, we will spend everything that we should, and if someone in Brussels complains, that won’t be our concern.
This ain’t Greece ca. 2015, by God. There’s not even a hint of concern from Salvini, who seems to realize that Italy isn’t exactly expendable. If the country succumbs to some kind of meltdown, it would tip a lot of dominoes for the rest of the bloc.
That he would say something as unequivocal as he said on Tuesday, seemingly without regard for how Di Maio or Conte would have answered the same question, is indicative of the fact that, one way or another, it will be Salvini who makes these decisions down the road. We’ve been over this before (see the linked post above and countless others). The only way that doesn’t end up being the case is if Italians recognize Salvini for what he most assuredly is: An aspiring strongman with designs on consolidating power and running Italy based on a kind of “soft” one-man rule (pardon the apparent contradiction in terms).
Italian bond yields shot higher on Salvini’s comments and “lo spread” ballooned out to 283bps, near the widest levels of the year.
“It’s quite irresponsible to let the spread rise the way it is doing right now with comments on exceeding the debt-to-GDP limit which is even more worrying than exceeding the deficit-to-GDP limit”, Di Maio told reporters in Perugia. “Ours is a country where tax evasion totals 300 billion euros and we can recoup lots of resources from the big tax evaders so, before shouting our mouths off on the debt-to-GDP, let’s cut the wasteful spending that hasn’t been cut in all these years and fight tax evasion”, he added.
Right, but see, that’s the whole point. Salvini can, will and does “shout his mouth off” about anything and everything whenever it suits him. And although it’s obvious that Di Maio and others aren’t amused, what’s not entirely clear is whether they appreciate how perilous this situation is becoming. Salvini gets more bold seemingly by the day.
This comes at an inopportune time with the EU elections on deck, trade tensions flaring up and China’s economy yet to “prove” that the bottom is in. Italy is a persistent macro “problem child”, and when things get dicey, it starts to trade like one. Remember that disconnect we talked about in April, when the BTP-bund spread was trickling wider while Italian stocks were still outperforming European equities more broadly? Yeah, well, that’s largely disappeared, along with Italian equities’ YTD performance lead over their German counterparts.
That was hardly the only soundbite out of Salvini on Tuesday. Earlier, he said he intends to change EU banking rules. “We need to change Europe mainly due to the disasters it has caused to Italians and not just to the Italian banks”, he remarked, according to Ansa.
If Salvini had his way, he’d change a lot more about Europe than banking regulations, that’s for sure.