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Wednesday, April 24, 2013

Italy's new Prime Minister: Pro-EU integration, anti-austerity?

We've detected strong demand for a quick profile on Enrico Letta, who has just been appointed Italy's new Prime Minister. With the debate raging over the wisdom or otherwise of German-style fiscal discipline in the eurozone, the big question is: is Letta against austerity? Here's a short bio:
  • He holds a PhD in European Law, and was appointed Europe Minister in 1998. At the time, he was 32 - which made him the youngest Italian minister ever. He also served as Industry Minister under Massimo D'Alema.
  • Letta was an MEP between 2004 and 2006. 
  • He's been the deputy leader of the centre-left Democratic Party since 2009.
  • Importantly, he is a big AC Milan fan - which could help him win support from Silvio Berlusconi. Well, perhaps along with the fact that Enrico Letta is the nephew of Gianni Letta, Il Cavaliere's closest aide. 
So what about his political views and that key austerity point?

In his press statement after the meeting with President Giorgio Napolitano, Letta said Italy should be
"firmly committed to changing the direction of EU [economic] policies [which are] too focused on austerity, which as European Commission President [José Manuel] Barroso said the other day are no longer sufficient."
(Hallo, Angela!) 

And remember that when the EU won the Nobel Peace Prize, Letta tweeted the award should be
"a spur to be prouder, more concrete and effective in our pro-European stance. There's no future without the United States of Europe." 
This goes to show he is strongly in favour of more EU integration (though admittedly so are a majority of Italian politicians). In other words, Napolitano has appointed a Prime Minister with solid European credentials and who can credibly argue for an easing of austerity in the EU. Quite smart. 

Crucially, Letta also stressed the new government won't be formed "at any cost". This can be seen as a warning to Silvio Berlusconi not to set out too tough conditions for lending his support. However, it's worth bearing in mind that Berlusconi's centre-right alliance is ahead in all opinion polls - meaning Silvio is in a position of strength right now.

Letta will hold talks with all other political parties tomorrow. If things move on smoothly, we should have the list of ministers by the end of the week. Follow us on Twitter @OpenEurope and @LondonerVince for further updates from Italy. 


Rik said...

Pro-EU and anti-austerity. They should have kept Mr BungaBunga himself. A lot more fun for the spectators.

Anyway. Everybody appears to be moving to the anti-austerity camp, with as main exception the only party that really matters, Germany.
The Dutch btw are anti-austerity for themselves not for others, as are in fact the German's, but their budget simply doesnot show it as their economy goes much better.

Some remarks on that.
- It means that Germany might come to the question earlier to pull the plug or not. The bigger the commitment has to be the more difficult it will be to get out later.
- It might also force them to accept for political reasons less austerity in order not having to pull the plug out.
Which one, likely to be determined by the political circumstances at the homefront (and that of Holland, Finland mainly) at the time the decision has to be made.
- My guess is that the ECB would be given some more room if these want to take that. My guess is they will not be very eager to do so. They also have a legal problem to cover and that way Germany is dropping their legal and political issues-garbage bags at the ECB's door.
Treatychange to make it officially possible seems highly unlikely (Germany needs a referendum for that).
- With the German economy going badly. It might be that there is somewhat more room for stimulus in general. A bit more room for the ECB with alternative policies (preferably of other than the bondbuying kind). But the room for that looks limited. ECB set up simply doesnot give the ECB very much room. And clearly breaking the law has all sorts of negative consequences especially as there are parties around that will use it to attack the ECB in all ways possible if it does.

Anyway Merkel will be a complete idiot if she supports a megalomanic, loose gun with limited braincapacity as Barosso for another term. As she isnot I looks pretty certain he will follow Ashton and Rompy.
May be something for Rutte, he will be better in Dijsselblooming than Dijsselbloom himself. Berlusconi back, that Grillo guy looks like a lot of fun it, started to get too dull anyway on the European front.

Rollo said...

It is a shared dream of all the failing states: to have a completely united Europe a unified banking system, Eurobonds, to subsidise their own failing economies. Given that aim, how many of the solvent states want to go along with unity? My guess is, none.

Anonymous said...

You're wrong: Letta is not yet The Prime Minister.
He is only trying to put something together that will never work. Italy needs people with balls and clear conscience.

christina speight said...

If he's pro EU integration and simultaneously anti-austerity he'll come to a sticky end with the rest of the fated Eurozone.

Did you all see that undesbank chief Jens Weidmann attacks FTT The head of the German central bank or Bundesbank has warned that a planned European financial transactions tax could have unexpected negative implications for monetary policy, and "Ero may only last five years", says senior German government advisor
The euro has a “limited chance of survival” and may only endure another five years, Kai Konrad, one of the German government’s closest economic advisers, has claimed.

Too long for me for in 5 years I may not be able to dance on its grave.

christina speight said...

Ambrose Evans Pritchard in today's Telegraph Business News examines the whole situation with great precision and clarity, See :-http://www.telegraph.co.uk/finance/comment/ambroseevans_pritchard/10016431/Italy-needs-Churchillian-leader-to-fight-war-damage-of-EU-austerity.html

A quote :- "One hates to cite Grillo as an authority, but he was more right than wrong to warn on Wednesday that Italy is running out of time. “A firm is closing every minute. By autumn we will have reached the point of no return.”
Let me be clear, Italy is not a fundamental basket case. - - - -
Private debt is lower than in Holland, France, the US, Britain or Japan. Its International Investment Position is near balance, unlike the Iberian disaster stories.
It has a primary surplus of 2.5pc of GDP, meaning it can leave EMU and regain competitiveness at any moment it wishes without facing a funding crisis."

The one thing it doesn't need is what it has been getting!! It will soon be too late for the economy which was healthy HAS BEEN WRECKED by the EU/Euro.

The new PM if he gets the job is another EU trained app`aparatchik. "Anarchist comedian Beppe Grillo – patron of the Five Star bloc in parliament – called the shadowy manouevres that led to this a “coup d’etat”, orchestrated over a “quiet weekend of vomit”."

Dr. Worden said...

I think the new Premier gets it. It is particularly sad when politicians can find out only after the fact that their policy had been ill-suited to the economic condition of their time. More sad still is when those politicians continue on, in denial,even as the verdict is coming in. For more analysis, pls see my essay at http://www.thewordenreport.blogspot.com/2013/04/does-austerity-work.html