November 17, 2019
Finance

How Macron gave Italian populists a boost

ROME — Europes best friend, Emmanuel Macron, handed Italian populists a helping hand by announcing a spending spree of his own.

During a 13-minute televised address to the nation on Monday night, the French president promised a minimum wage increase and tax cuts, including for low-income pensioners, in an attempt to appease the Yellow Jacket protesters. The announced measures could push Frances budget-deficit-to-GDP ratio to 3.5 percent, well over the EUs 3 percent ceiling, according to an anonymous government source quoted by French daily Les Echos.

Because of those very same rules, Italy faces the prospect of the European Commission launching against it an excessive deficit procedure (EDP) based on Romes exorbitant public debt. The countrys populist government had announced that it would be increasing the budget deficit to 2.4 percent of GDP to fund election promises such as a basic income for all and a pensions overhaul.

“But but but, Macron said hes cutting taxes and increasing public spending … does [Economic and Financial Affairs Commissioner Pierre] Moscovici agree?” Claudio Borghi, a top League MP and chair of the lower houses budget committee, tweeted after Macrons announcement.

During a hearing at the European Parliament in Strasbourg on Monday, Moscovici said the Commission would be looking at the French plans very closely. He also noted that the situation was different to Italys.

Italian Deputy Prime Minister and 5Star Movement Leader Luigi Di Maio

However, it would be a lot more complicated for the Commission to press on with its plans to punish Rome for its extra spending while sparing France. Macrons potential EU rules breach will also prove harmful for the ongoing negotiations on a eurozone budget, which France has spearheaded.

“Europe is facing a deep political crisis,” said Tiziana Beghin, a 5Star Movement MEP. “Well see how Macrons promises will be implemented, but one thing is certain: We will not accept that there are first-class and second-class citizens in Europe.” Italy would not accept a discretionary application of EU rules, Beghin added.

The 5Stars have been among the most vocal supporters of the Yellow Jackets, which they see as a movement against the EUs elites and fiscal rules. “The French protesters demands are exactly what we have included in our budget law,” said 5Star leader and Deputy Prime Minister Luigi Di Maio last month.

Speaking before the Italian parliament on Tuesday, Prime Minister Giuseppe Conte said he would head to Strasbourg on Wednesday to explain why Italy was forced to review its previous commitments and increase public spending. “Italians voted to end policies that have impoverished citizens,” Conte said.

“Macrons speech will force the Commission to think twice before sanctioning us” — Italian government official

The prime minister explained that while respecting EU rules, the governments main duty is to urgently address the needs of Italys poorest citizens. Conte has been engaged in negotiations with the Leagues Matteo Salvini and Di Maio to lower the planned deficit to avoid the EDP.

But for now, Macrons moves have further emboldened the Italian populists.

“Obviously, Macrons speech helps us and will force the Commission, especially the French commissioner, to think twice before sanctioning us … even the most liberal, elitist, establishment-friendly leader in Europe must perform a U-turn when the people demand so,” one government official in Rome said.

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