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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 Bundesbank Director 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.
In taking this stance, the public and policymakers are revealing double standards. Germany approved a bailout for HSH Nordbank when it was on the verge of a collapse. Since 2008, the German state injected 197 billion euros in the domestic banking system, roughly equivalent to 7 percent of national GDP. On the other hand, however, the EU Commission has warned Italy that its support for local bank Banca Tercas is incompatible with the rules of international financial assistance.
It is easy to understand why Italy is unhappy. The EU economic policies promoted by Germany have failed to guarantee a substantial economic recovery and have not alleviated unemployment. European Union unemployment figures hit 10.5 percent in November 2015 (only dropping a point from a year prior). Greece’s unemployment rate was a staggering 24.6 percent, and Spain’s 21.4 percent. Despite such figures, it has become impossible for EU officials to admit defeat—doing so would mean openly rejecting the union’s current policies, and may even require further EU-backed stimulus on the state level for Italy and beyond. Meanwhile, citizens across Europe are stuck wondering whether their governments are actually fit to govern; the most recent Eurobarometer poll from December 2015 shows that 41 percent of Europeans are pessimistic about the European Union’s future, and 54 percent of those polled believe that their voice does not count.
The disparate recoveries happening throughout the Eurozone help shed light on another pain point in European politics. Italy is demanding more flexibility with its public deficit and austerity measures. And therein lies the conflict between Renzi and Juncker, with the latter criticizing Renzi for his open challenge to the European Union. But Italy is not just putting pressure on Germany on the financial front. In April, 2014 the European Union stated its opposition to the South Stream gas pipeline project, which would have brought Russian oil to southern Europe and the Balkans by way of Austria and Hungary. The project would have been built by the Russian gas firm Gazprom and the Italian energy company Eni, among others, through the Black Sea. Instead, Berlin has backed the Nord Stream 2 pipeline, which would double the amount of Russian gas currently heading to Germany, with potential benefits for northern European nations (and would be constructed by German and French firms). This plan, if approved, would stand in opposition to Europe’s overall aim to reduce its dependence on Russian energy, and would undermine the sanctions placed on Russian President Vladimir Putin’s regime.
THE ITALIAN JOB
With opposition to German leadership growing in Europe, many wonder if Italy is ready to lead the charge against Merkel’s vision for Europe. If Renzi is up to the task, it would help raise Italy’s lacklustre international profile in the European Union, and would boost the visibility of the continent’s problems in the greater Mediterranean. Renzi’s first measure will be the proposition to revise the European Union’s First Country of Entry rule for arriving refugees from the Middle East. The current legislation requires states like Italy and Greece to register and process thousands of asylum claims, as they are the first nations that many refugees hit on their way to Europe. If Renzi is successful, this burden will likely shift away from Mediterranean states in favour of a more balanced approach.
However, for this rebalancing of EU leadership to happen, Italy must search for regional allies. And a few components of EU politics could help Renzi in his search for friends. His Partito Democratico party has become a leading force, with the majority of MPs, for center–left politics in European parliament. If Partitio Democratico wants to forge an even wider consensus, it could overcome divisions with European socialist parties and mend fences with green parties and the broader anti-austerity left, particularly in other southern European countries.
Bringing these disparate groups together, however, will be no easy task. And Renzi, despite his promise, has yet to build a solid international reputation. In that sense, there may be no significant changes on the horizon yet for European politics in 2016. But over the next few years, the coalition against austerity could grow stronger. And with few other leaders standing up to Germany, Renzi could end up being the one to galvanize the opposition. Although he faces an uphill climb, there may just be enough public disappointment and distrust regarding the European Union for him to come out on top. For the first time in years, Europe is experiencing an open opposition to German politics in the European Union. If Renzi and his allies are able to galvanize their ranks, the continent may finally have an alternative balance to power that is not vested in nationalist, far right, and anti-EU forces. Now, all Italy must do is take on the economic powerhouse of Europe.