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Italy and EU relation

In 2018, Italians challenged the EU by acting a populist government. The coalition of the League and the Five Star Movement proposed a budget which led the EU to threaten an unprecedented fine. The government also opposed the EU’s regulations on migration. This year, too, the key issues in Italian politics continued to be defined by Italy’s relationship with the EU. first half of the year, the EU reacted against Italy’s attempts to improve its ailing economy. EU officials and politicians sought to undermine Italy’s sovereign right to sign a non-binding memorandum of understanding with China to be involved in the Chinese Belt and Road Initiative. After Italy’s lower house of parliament passed a motion to introduce so-called ‘mini-BOT’ debt IOUs, Mario Draghi, the then president of the European Central Bank, insisted this was an illegitimate fiscal measure.

When Italy passed a law on security and immigration to stop ships run by NGOs carrying migrants from docking in Italian ports, the government was widely criticised by senior European ministers. These criticisms were made despite the EU’s own measures to reduce the number of migrants arriving in Eu

In October, the new government submitted its budget for 2020 to the EU. It projected a deficit of 2.2 per cent of GDP – the same as that proposed to the EU by the populist government in 2018. While the proposal by the populist government was rejected by the EU and led to the threat of a fine, the new pro-EU government’s budget was nodded through.

The new government’s prime minister, the aptly named Conte (meaning ‘count’ in Italian), is now playing a pivotal role in the latest and hugely significant battle for Italian sovereignty over financial reform. In June, Conte backed reform to the European Stability Mechanism (ESM), which was set up by Eurozone countries during the 2012 debt crisis. The ESM extends credit to governments accepting reforms. It can also buy government bonds and inject capital into banks. Reforms under discussion include making the ESM the backstop for failing banks, mediating between investors and governments over debt restructuring, and assessing governments’ ability to repay loans if bailouts are requested. These reforms would make debt restructuring more likely and it would be harder for investors to block restructurcion.

an EU summit on 13 December, European leaders were due to agree to the above financial reforms, but Italy withdrew its support. The EU decided finance ministers would continue working on these reforms with the aim of an agreement in June 2020.

Dealing with poor performing banks in a period of stagnation is a pressing issue in Italy and other EU countries. On the evening of 13 December, hours after Conte had declared Italy’s banks to be in good health, the government prepared an emergency decree to rescue Banca Popolare di Bari due to a capital shortfall of €900million. Even with this rescue, 69,000 shareholders – among them many normal Italians who have invested their savings – still stand to lose their money.

Banca Popolare bailout came after Italy was widely criticised for using state funds to rescue Genoa’s Carige bank, two unlisted cooperative banks in the Veneto region and the Monte dei Paschi bank in 2017. But this year, Germany also used taxpayers’ money to rescue NordLB bank. But this was approved by the European Commission without fuss.

Momentarily, Italy’s new government has asserted some parliamentary sovereignty against further EU intervention in its banks. Yet when so many key issues from immigration to the economy – and even who governs the country – are influenced by the EU and conditional on Brussels’ support, many Italians feel there is little point in voting.