The Week Ahead

This week promises to be another ‘busy’ one. Today the EU finance ministers (Ecofin) are meeting in Luxembourg, to discuss the condition of the common currency after last week’s ‘battering’ in the press and in the financial markets. Also headed for Luxembourg is EU Economics Commissioner Joaquim Almunia. Amongst other items he will have one in particulr which is high on his agenda: a meeting with Italian Ecomy Minister Domenico Siniscalco. Almunia is due to present a report on Italy’s deficit situation to the Commission tomorrow, and will almost certainly recommend the initiation of an excess deficit procedure under the revised terms of the stability and growth pact.

This order of events helps throw some light on the outburst from Lega del Norte Welfare Minister Roberto Maroni (the debate surrounding Maroni’s calculated statement has continued unabated over the weekend). One could see the Maroni declaration as kind of ‘positioning’ prior to the fierce political argument which is bound to take place when Siniscalco finally has to accept publicly that this process will go forward, and that Italy will have to actually reduce public spending in the midst of one of the most serious recessions Italy has known in recent times.

As reported in A Few Euros More, part of the problem is that Italy has systematically under-reported its deficit to the Commission, and Eurostat has conducted a battle of heroic proportions just to get to the facts.

The procedure seems to be as follows. Almunia will present a report tomorrow to the Commission at its weekly meeting. This will then open the excess deficit process against Italy, a measure which will in its turn need confirmation at the next Ecofin meeting on 12 July.

Left Democrats leader Piero Fassino pulls no punches and names names: it was (former Economy Minister) Tremonti and (current Economy Minister) Siniscalco who rigged Italy’s public accounts (Maroni’s polemical statement also needs to be read in this context, since part of the ‘rigging’ was done prior to entry, in order to meet the conditions of joining, this also seems to have been the case with Greece).

“It’s not like the EU suddenly got its estimates on Italy’s finances wrong. Rather, it was (former Economy Minister) Tremonti and (current Economy Minister) Siniscalco who skillfully managed to rig Italy’s public accounts before subitting them to the Italian Parliament and Brussels. They gave a picture which was far-removed from the actual situation,” said Left Democrats leader Piero Fassino. Commenting on the controversy between Italy and the EU concerning Italian finances, Mr Fassino said that “for years, the government maintained that Italy’s budget deficit was within the 3pct threshold. Now, we’re suddenly finding out that it’s not. As a matter of fact, it’s well above 4pct. If we carry on like this,” he noted, “it will hit 5pct next year. Mathematics cannot be questioned – not even Berlusconi can.” Finally, he said that “Berlusconi, Siniscalco and Tremonti must stop thinking they can fool Italians. By doing so, they have led the country into its biggest recession for many years.”
Source AGI (Italy’s ‘Official’ news agency).

Meantime, navigating in possibly ‘calmer’ waters: Jack Straw is expected to effectively ‘kill-off’ the Constitution ratification process by informing parliament that UK referendum plans are to be ‘frozen’ pending decisions elsewhere in the EU.

6 thoughts on “The Week Ahead

  1. Italy cannot push the deficit below 3%. It is not a question of will. They’ll put the nuclear option on the table and blackmail the ministers into squashing the penal process. They’ll go along and we can say goodbye to SGP 2.

  2. I don’t share your cynicism here Oliver. Either the Commission moves strongly against Italy, and the Italian government responds, or the euro meltdown thesis will really start to gain weight.

    Everyone has backs to the wall here, and Maroni sees his opportunity. The medicine of course won’t work, and Italy’s recession will only get worse, but the Commission have no alternative. Otherwise it’s pack up your bags and go home time.

  3. One also has to remember, putting this in perspective, that Maroni and Co. also profess to believe in northern withdrawal from Italy, but no-one seriously fears the disruption of Italian national territory as a result of their presence in government.

  4. “but no-one seriously fears the disruption of Italian national territory as a result of their presence in government.”

    Oooh, I’m not sure Alex. One of the big details about the EU we have is the huge information divide. There is virtually no freely available info on Italian economic or social or political debates in widely read media. The same also goes for Spain, Portugal and Greece (I mean when did you last read anything really informative about Greece in the mainstream media. Holidays and Olympics perhaps).

    I wouldn’t argue it so strongly, but there is probably another bloc in Scandinavia, and another one in Central Europe.

    It isn’t only labour which isn’t mobile in the EU, it’s information. Most of the debate is centred on political and social life in the ‘big three’.

    So while you may be right that the danger of Padano secession is slight, this doesn’t mean that ‘no-one seriously fears it’. I imagine the government’s opponents suggest that by having the Lega in the government they are precipitating it. Of course, the opposition ‘may not be serious’.

    Coming to Spain where I do know something, half a million plus people were on the streets of Madrid on Saturday partly at least because they believe that the support (not presence, but just support) of the secessionist Esquerra Republicana for the Zapatero government means that a Spanish break-up is a serious possibility. Of course ex-President Aznar was at their front.

    Now you may say these people don’t seriously believe what they say – but they do still believe that Eta was behind the 11th March bombings, so I personally wouldn’t be to sure.

    Will Spain break up? I doubt it.

    But Italy is in big trouble economically, and Berlusconi is one of the most irresponsible politicians in power in a modern democracy (NB he still hasn’t come out to frontally disagree with Maroni), so anything can happen.

  5. Either the Commission moves strongly against Italy

    I have no doubt that they’ll try. The question is, will the ministers let them?

    the Italian government responds

    How? They are in recession and effectively asked to cut government spending by 1% GNP. Keynes isn’t everything, but he was no fool either.

  6. “but he was no fool either.”

    Well let’s just leave this one a few weeks to shape up. I think we both know what the other thinks on this by now :).

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