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Italy’s Dangerous Budget Showdown With Europe

Brussels and Rome Are Playing a Game of Chicken

Luigi di Maio, Matteo Salvini, and Giuseppe Conte after a press conference in Rome, October 2018. Remo Casilli / Reuters

In late October, Italy’s populist government finally got its showdown with Brussels. In September, Italy’s powerful deputy prime ministers, Lega leader Matteo Salvini and Five Star Movement leader Luigi Di Maio, agreed on a draft budget calling for tax cuts and a minimum income for the unemployed, both of which would increase Italy’s deficits at a time when Brussels is pressuring Rome to reduce its debt load. Now Salvini and Di Maio expect European institutions to make concessions instead. It is hard not to imagine that this was their plan all along.

Salvini and Di Maio know that the European institutions will have to push back on any attempt to break the rules for macroeconomic policy coordination across countries—and specifically those rules that force Italy to rein in its debts and deficits. In turn, Salvini and Di Maio plan to argue that Brussels is preventing them

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