Daniel Dal Zennaro / Reuters Germany's Chancellor Angela Merkel (R) smiles with Italy's Prime Minister Matteo Renzi during the Asia-Europe Meeting (ASEM) in Milan October 16, 2014.

Going South

Italy Mounts Opposition to Germany's EU

At the end of 2015, German Chancellor Angela Merkel faced an unexpected challenge to her de facto leadership of European Union policy. Germany, long the driver of the European Union on economics and migration, has seen its hegemony challenged by none other than the Italian government and its outspoken Prime Minister, Matteo Renzi. Rome, it seems, is finally looking to recoup the losses to its credibility suffered during the tenure of former Prime Minister Silvio Berlusconi and the limited achievements in foreign policy since.

Here, Italy is helped by the fact that German popularity is waning, in part thanks to the unpopular austerity measures forced on Athens in return for EU financial bailouts. In nations such as Greece, Italy, and Spain that are currently suffering from budgetary control, it is evident that mainstream pro-European industrial and economic elites are becoming increasingly unsympathetic toward German-led European politics. And now, Berlin’s rigidity is now seen as an obstacle for national investment and recovery. Perhaps in response to this, Italy, long quiet on the issue of austerity on the European political stage, now seems to be willing—with some lingering reservations—to try to actively undermine German hegemony in Europe.

MONEY IN THE BANK

Italy’s first front in this war is bank bailouts. Over the last few years, Berlin has pushed southern European countries to tighten their belts and has approved stingier financial packages for the region’s ailing banks. Rome, likely for social and electoral reasons, is coming out in favor of strong protection measures for creditors if banks fail. Above all, Renzi wants to see a European deposit insurance shared by all member states, which with the prospect of a harmonized EU banking system, would bring together collective responsibility. His position is supported by the European Commission and the European Central Bank, but still faces vocal opposition from German authorities. In other words, a shared insurance policy would only be possible after national public debts are reduced. According to many, including Jens Weidmann, the principle of burden sharing is fundamental because creditors have to contribute to the “failure” of their banks, so there is less state intervention and use of public funds. Likewise, a portion of the northern European public does not trust the economic integrity of southern Europe, and has expressed fear about its money going toward the fiscal health of less reliable states.

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