The audacity of the Italian populists in the dispute with the EU is hard to beat. The deficit is to be tripled to 2.4 percent of economic output. At the same time, with more than 130 percent of GDP, Rome’s debt is twice as high as allowed by EU rules . The coalition of five-star movement and Lega party can only be replaced by the Italian voters. However, they prefer to rely on promises – from the civic income for destitute people in the amount of 780 euros, tax cuts to a pension reform.
Bella Italia is not helped when European politicians stare at the immense mountain of debt. Interest rates have been low for a good ten years . It was thus possible for Italy to extend the term of the debt relatively favorably. It therefore depends mainly on what the money is spent exactly. Brussels must – even in its own interest – the line of communication to Rome not demolished. Only by saving alone, no country has made it into the black again.
Therefore, the EU should help Italy to make more debts – just the right ones. Such a compromise can not be denied by the government in Rome. Because the more dangerous problem for Italy is the lack of growth. And here it must be doubted that tax cuts and higher social spending fruit.
Instead, Brussels is called upon to work with Rome to launch a sustainable economic policy that will relieve the country in the long term. The sticking points are the massive decline in economic output of five percent in the past ten years and the high youth unemployment rate of 30 percent. The jobs – less the debts – are the linchpin of the Italian misery. First, companies need to be motivated to create new jobs. Italy’s economic backbone is the middle class. Another decisive factor is the fight against the devastating corruption – an immense investment risk. Here more money has to go to the law enforcement agencies.
Such an EU package does not exclude the necessary signal of harshness over the impudence of the populist government: Europe can not be blackmailed. Perhaps it would be advisable to clarify that help from the European bailout is already not legally available if Italy does not agree sanitation requirements, but deliberately violate EU requirements. Also a warning would be beneficial that without the euro, the interest rates on Italian government bonds could increase almost tenfold.