The disappointment in Italian society in relation to the EU at the beginning of the corona crisis has now changed to confidence. Now the expectations of financial solidarity are particularly directed towards the forthcoming German EU Presidency.
Solidarity - not charity
On 26 March 2020, the European Council failed to embrace a collective financial response to the economic consequences of the Corona pandemic. This lack of solidarity - especially with the hardest hit member states - unleashed a fierce reaction by the Conte government, the media, and the general public. Conte’s strong declaration, “Then we will do it alone!” underscored the risk of events moving in a direction that could result in not just the end of the Euro, but of the entire European Union. At the height of the virus crisis, large segments of the Italian public - who were already skeptical towards the European Union - quickly became openly hostile. Germany was held primarily responsible for the situation. The image of the "ugly German" appeared and became widespread.
Big disappointment over the EU and Germany
Over the last six weeks, Italy’s relationship with the EU and Germany has calmed down again. There were several factors which contributed to this shift: After very unfortunate remarks against any kind of Euro bonds, President of the Commission, von der Leyen, completely reversed direction in an April 8th letter to Conte; Christine Lagarde, President of the ECB, made comprehensive concessions dampening the outrage caused by an earlier statement that it was not the ECB’s task to cushion Italy’s debts; in April, Italy-friendly articles appeared in key mainstream German media; and lastly, there were concrete steps towards a comprehensive EU financial package. Today, Italy and the Italians are generally confident about the European Union and particularly about the upcoming German EU Council Presidency.
There remains, however, much to be done to counteract the anti-German and anti-European tendencies of the opposition parties and to offset a loss of public trust. Moreover, the May 5th ECB decision of the Federal Constitutional Court – covered by the media like no previous decision of a German court – is a huge setback.
Italy places hopes in the proposed Recovery Fund
Increased expectations for the pivotal second half of 2020 and the German EU Council Presidency are closely tied to the rescue package and the proposed Recovery Fund. In a May 8th letter to the Commission President France, Spain, Greece, Portugal, and Cyprus demanded that the Recovery Fund provide mainly non-repayable subsidies and be finalized no later than by the end of September. Furthermore, the Fund should be included in the 7th EU Budgetary Framework and distributed primarily to the hardest hit countries. There should be clear parameters for usage of the funds. Rapid adoption of the Budgetary Framework as well as bringing forward lending capacities to this year are critical.
Italy expects solidarity – not charity
For Italy, the key is to bring down the interest burden of an inevitably increasing public debt. This requires reducing the “spread”, or amount Italy must pay above the Bund interest rate. Italy currently pays € 76 billion of interest per year, or about 3.6% of its GNP. The rescue package is not an act of charity but an expression of solidarity among the EU community of states in light of a crisis that is affecting all – albeit in different ways and degrees. Necessary controls should be implemented by means of a European financial and economic governance scheme yet to be introduced.
In the area of European asylum and migration policy, Italy expects the EU to decide during the German Presidency how it wants to address the Common European Asylum System proposed by the Commission in 2016. Of the seven legislative proposals, at least two are still highly controversial: the reform of the Dublin System and the conversion of the EU Asylum Procedures Directive into a Regulation in case of serious asylum law restrictions. With regards to “Dublin”, it is expected that the EU will abandon the principle of responsibility which in practice means that countries with sensitive sea borders bear sole responsibility for essentially all asylum seekers. This highlights the urgent need to establish a mandatory framework for the redistribution of persons rescued at sea as well as migrants disembarked in the Mediterranean countries. In light of the unwillingness of a number of member states the “Two-speed Europe” principle may have to be applied. Moreover, Italy notes that in the "Dublin" proposal, the Commission estimated the total cost for receiving one asylum seeker at € 250,000. This could become the standard for incentivizing countries to participate in an EU-funded redistribution of asylum seekers.
Italy also expects the EU to provide stronger incentives for the sustainable restructuring of industry and infrastructure as part of the transition to the Green Economy. This would include achieving climate goals, expanding renewable energy sources, and gradually reducing the dependency on raw material imports from third countries. Italy is already pretty well positioned with a 36% share of renewable energy power sources (planned to be increased to 55% by 2030).
Important Italian media have recently complained that current and planned contributions by the EU to Italy - and other member states - have not been effectively communicated and consequently not fully appreciated by the public. Given the need to counteract anti-European tendencies, Italians do expect that an effective communications strategy will be developed under the German Council Presidency. Seeing that most people are still familiar with the Marshall Plan 70 years after the fact, the historic dimension of the EU’s two trillion euro rescue package should be highlighted.