Italy could challenge the choice of Christine Lagarde for the Presidency of the European Central Bank (ECB) while also calling into question the fiscal compact, which frames budgetary policy within the Eurozone.
In an interview with La Stampa published on Friday, Finance Minister Giovanni Tria made clear that the fiscal compact – a fiscal agreement between 22 member states – is restrictive and there is a growing consensus for its revision. Tria suggested that the need to revise the fiscal compact is acknowledged in Spain and France, but also in certain circles in Germany. “… Italy is not isolated,” Tria argues, adding that “it is now possible to relaunch the debate on the fiscal compact.”
Italy and France are moving on stimulus policies, slashing taxes and increasing welfare spending, as the economy decelerates and social pressure is mounting. Both Rome and Paris have launched packages of approximately €10bn.
In addition, both Paris and Rome are more assertive in their national industrial policy. France was willing to block the merger between Renault and FIAT-Chrysler, so as to ensure state participation in the auto industry. Meanwhile, Rome insists in saving the national air carrier, Alitalia, through the creation of a new company driven by the state-owned railway company, Ferrovie dello Stato.
Although Italy and France are moving in parallel, they are not aligned. Fiscally, France has more space for expansionary policy. The French debt-to-GDP ratio stands below 98%, while the Italian is 132%, second only to Greece in the Eurozone. Politically too, Rome and Paris are at odds, with Paris honing the historical Franco-German axis as the political driver of EU integration while Italy is now emerging as the epicentre of more Euro-critical approaches to economic policy.
The latest Italian objections to the appointment of Christine Lagarde as President of the European Central Bank makes abundantly clear that there is little scope for Franco-Italian coordination. Officially, Rome conceded to her appointment but a number of voices in Rome maintain that Italy may present its own counterproposal, pointing to the Deputy Governor of the Bank of Italy Fabio Panetta.
That is not merely the voice of Lega: the President of the economic committee at the European Parliament, Roberto Gualtieri, told the Financial Times that he also stands behind Panetta’s candidacy. Gualtieri is an MEP for Partito Democratico.