Category Archives: Italy

(BBG) Trump Offered Italy Bond-Buying Help, Report Says

(BBG) President Donald Trump told Italian Prime Minister Giuseppe Conte the U.S. is willing to help the country by buying government bonds next year as Italy seeks to refinance its debt, Corriere della Sera reported, citing three high-level Italian officials.

Conte is said to have told officials about the offer after returning from his meeting with Trump at the White House about three weeks-ago, the newspaper said. Conte didn’t give any details on the plan or say whether it’s feasible, Corriere added.

Italy’s bonds have been roiled in recent months by the Five Star Movement-League coalition and its plans to boost spending while cutting taxes in their September budget. The 10-year yield spread over Germany could blow out to 470 basis points — the highest level since the euro area debt crisis — from around 275 currently, should the budget break the EU’s deficit limit of 3 percent. The spread was little changed Friday.

“I laughed quite a lot, when I saw the report,” said Jan von Gerich, chief strategist at Nordea Bank AB. “I am not aware of any portfolios that he has direct control over.” Trump could probably use his clout to try to persuade domestic investors or public pension funds to buy “but that would most likely amount to something nominal rather than significant amounts.”

Trump has frequently expressed his support for anti-immigration movements in Europe and political leaders who challenge the established European Union order. League Party leader Matteo Salvini and his populist ally, Luigi Di Maio of the Five Star Movement, have been demanding the EU bend its rules on deficit targets to allow them to boost spending and cut taxes. They have also tied Italy’s EU contributions to the immigration issue, a stand that has also roiled Italian bonds.

Italy’s deficit this year is forecast to be 1.6 percent of economic output, well within the euro zone’s limit of 3 percent.

Salvini separately told Corriere that he sees signs of an economic attack against the country. He said Conte did the right thing by meeting Trump and praised the finance minister’s plan to travel to China to seek investors. “We have to be open to every scenario,” he said.

(Economist) A deadly bridge collapse points to Italy’s structural weaknesses

(Economist) Infrastructure is ageing, and the government is faulty

IT WAS the stuff of motorists’ nightmares: on August 14th, a pillar supporting a bridge over the Polcevera river in Genoa collapsed. Three heavy vehicles and up to 35 cars plunged 45 metres from the A10 motorway into the dried-up river bed and onto nearby warehouses. As The Economist went to press, 39 people were known to have died; the search for survivors was suspended for fear of further collapse.

Why did it happen? Like many in Europe and America, the bridge was old: it dated from 1967. It had been stressed by ever-heavier vehicle loads. That day, it was battered by a storm and struck by lightning. But none of that explains its collapse. One theory, advanced by Antonio Brencich, a lecturer at the University of Genoa, is that the bridge was innately flawed. It was of unusual construction: its designer, Riccardo Morandi, encased the stays holding up the deck in concrete. Only two other bridges—in Libya and Venezuela—were built in that way, both by Mr Morandi. The one in Venezuela also collapsed, but after being hit by a ship.

Italy’s populist government found others to blame. Three other bridges have collapsed in Italy with less publicity in the past three years, and the interior minister, Matteo Salvini of the Northern League, claimed the European Union’s budget-deficit limits had prevented Italy from spending enough on infrastructure. But figures suggest it may actually spend too much on patching up its infrastructure, and not enough on renewing it (see chart). Then Mr Salvini accused the franchise holders of the motorway, Autostrade per l’Italia, of failing to maintain the bridge. Sweeping aside the firm’s denials, the infrastructure minister, Danilo Toninelli of the Five Star Movement (M5S), said he had initiated procedures for revoking the company’s franchises and fining it up to €150m.

That helped deflect attention from a deep crack in the coalition: the M5S, which has a history of NIMBY-ism, has vehemently opposed infrastructure projects the League supports. Indeed, it opposed a bypass that would have relieved traffic on the very bridge that collapsed. At a rally in 2014 the M5S’s founder, Beppe Grillo, denounced the project as a waste of money; on its website, opponents of the scheme ridiculed fears that the bridge would collapse as a “fairy tale”.

(EurActiv) UN says migrants’ return to Libya by Italian boat could be illegal

(EurActiv)

Federica Mogherini (C), High Representative of the European Union for Foreign Affairs and Security Policy, arrives to Mitiga International Airport prior to her departure, in Tripoli, Libya, 14 July 2018. [Sringer/EPA/EFE]

A rescue operation in which an Italian towboat rescued more than 100 migrants and returned them to Libya earlier this week may have been in breach of international law, the United Nations said on Tuesday (31 July).

A spokesman for the UN migration agency said it could not establish the location of the rescue, which is key to establishing migrants’ rights, although some other parties involved in the case have made contradictory assertions about the incident including where it took place.

The rescue coincides with a growing perception among human rights groups that some European countries are taking an increasingly hard line in their efforts to cut the number of migrants arriving on their shores, after Italy’s new government closed its ports to charities’ rescue boats in past weeks.

According to Spanish charity Proactiva Open Arms, an Italian towboat, Asso 28, rescued 108 migrants from international waters on Monday and took them to Libya, their country of departure.

UNHCR Italia

@UNHCRItalia

Stiamo raccogliendo tutte le informazioni necessarie sul caso del rimorchiatore italiano che avrebbe riportato in 108 persone soccorse nel Mediterraneo. La Libia non è un porto sicuro e questo atto potrebbe comportare una violazione del diritto internazionale

This would constitute a breach of international law, under which people rescued in international waters cannot be returned to a place where their lives are put in danger. Both the United Nations and European Union have acknowledged that Libya is not safe.

Italy’s coast guard initially said on Tuesday that the rescue was coordinated by the Libyan coast guard, and later clarified that the operation had taken place in Libya’s so-called “search and rescue (SAR)” area.

The Libyan coast guard was not immediately available for a comment.

Libya’s SAR is not clearly defined but is widely understood to extend far beyond its national waters.

Proactiva spokeswoman Laura Lanuza said its members learnt the rescue occurred in international waters because their boat Open Arms was nearby and they could listen to radio communications between the Italian ship and the Libyan authorities.

The UN refugee agency said the operation “could represent a violation of international law,” it said on Twitter.

A spokesman for the UN migration agency said the agency was still investigating the case but confirmed the return of the migrants to Libya.

He said the Libyans first told him the rescue operation was carried out by “an unknown vessel”, then changed their version and said the rescuing boat was Libyan.

The head of mission at Open Arms, Fabrizio Gatti, contradicted the Libyan version and said a member of the Asso 28 crew told him over the phone the Italian boat carried out the rescue and was taking the migrants back to Libya. He said he had a record of the conversation.

Asso 28 is now docked in Tripoli, the Libyan capital, according to Marine Traffic, a real-time information service on ships movements.

Charities are at loggerheads with the new Italian government and its right-wing home affairs minister Matteo Salvini who has adopted a hard line to cut the number of migrants arriving on Italy’s shores.

German NGO Sea-Watch also condemned “the first pushback by an Italian vessel for years,” on Twitter.

Sea-Watch Italy@SeaWatchItaly

108 persone in fuga dalla Libia soccorse in acque internazionali da nave ITALIANA e portate a Tripoli.
Il caso segna un grave precedente e richiama la condanna dell’Italia per i RESPINGIMENTI COLLETTIVI (CEDU 2012, caso ).

Denunciamo una pericolosa regressione.

In 2012, the European Court of Human Rights ruled that Italy violated human rights by sending migrants intercepted at sea back to Libya in 2009.

The court said the practice violated international obligations to not return individuals to countries where they could be at risk of human rights abuses.

Salvini praises Libya

As NGOs expressed their dismay over the latest boat controversy, Italy’s far-right interior minister Matteo Salvini, who has closed the country’s ports to migrant rescue ships, praised the Libyan authorities.

“Over the last hours the Libyan coastguard has saved and brought back 611 immigrants to Libya. NGOs protest and traffickers lose their business? Well, we carry on with our work”, he tweeted.

Matteo Salvini

@matteosalvinimi

La Guardia Costiera Libica nelle ultime ore ha salvato e riportato a terra 611 immigrati.
Le ONG protestano e gli scafisti perdono i loro affari? Bene, noi andiamo avanti così! e

Matteo Salvini

@matteosalvinimi

Se avete 5 minuti, vi consiglio questo video sul lavoro della nostra Marina davanti alle coste libiche. Dalle parole ai fatti.

However, the speaker of Italy’s lower house, Roberto Fico, who belongs to the Five Star Movement that governs in a coalition with Salvini’s League, appeared to disagree with sending migrants back to Libya.

“Libya is not a safe place… it is clear that you cannot leave migrants there,” Fico said as he met with protesters denouncing the sale of Italian boats to Libya’s coastguard on Monday.

Several commercial ships that have tried to take rescued migrants to Italy — as was standard procedure under the former centre-left government — have found themselves blocked by Salvini’s policy and stranded for days at sea searching for a port where they can disembark.

(BBG) Cristiano Ronaldo’s Move to Italy Is a Big Score for Jeep

(BBG) Italy’s Juventus Football Club SpA is paying a total of more than $130 million to nab star player Cristiano Ronaldo from Spanish soccer giant Real Madrid Football Club. The Italian team won’t be the only one trying to cash in on the Portuguese footballer’s fame.

Fiat Chrysler Automobiles NV, whose Jeep logo is plastered across the chests of Juventus’ black-and-white-striped jerseys, could get a huge advertising boost in the deal. If Ronaldo can lead Juventus to the UEFA Champions League finals, the media exposure for that one year will be worth about $58.3 million, according to Eric Smallwood, president of Apex Marketing Group Inc. That would be quite a return on the $20 million Fiat Chrysler pays each year for its Juventus sponsorship, according to SportsPro.

Jeep, which makes the iconic Jeep Wrangler, is the crown jewel in Fiat Chrysler’s stable of auto brands. The company forecasts global sales of 1.9 million this year, more than double the 730,000 sold five years ago. Chief Executive Officer Sergio Marchionne wants to bump that to 3.3 millionby 2022, a goal Ronaldo could aid, especially with Hispanic soccer fans, said Chris Chaney, senior vice president at San Diego-based brand consultancy Strategic Vision.

“I can see the fit and where it will help strengthen things,” Chaney said. “The freedom and the adventure, the openness that Jeep represents, it’s appealing to everybody, but it’s particularly appealing to Hispanic new-car buyers.”

Both Turin-based Juventus and Fiat Chrysler are controlled by Italy’s Agnelli family. A spokesman for Fiat Chrysler declined to comment on the value of the soccer deals.

The Agnelli family, which has owned Juventus for more than 90 years, controls Ferrari NV and Fiat Chrysler through its holding company, Exor NV, which owns 64 percent of Juventus. Andrea Agnelli, the cousin of Exor CEO John Elkann, has been chairman of Juventus since 2010. Beyond Jeep, Juventus sponsors such as Adidas, Allianz and Samsung are poised to benefit from Ronaldo’s move.

Juventus in January 2017 presented a new branding strategy to expand revenue from sales of merchandising internationally. Its efforts come as some of its rivals have been sold to Chinese investors, highlighting the value of Italian soccer teams. Juventus, winner of a record seven consecutive Serie A championships, has seen its share pricerise about 35 percent since talk of a deal for the star player surfaced last week.

Ronaldo scored 451 goals in 438 games since he joined Real Madrid in 2009, helping the club to win four Champions League titles, and La Liga, Spain’s top soccer division, twice. Also the UEFA Champions League’s all-time top scorer, Ronaldo earned $61 million dollars in salary and bonuses last year, plus an extra $47 million via endorsements, according to Forbes, making him the third-highest paid athlete in the world behind FC Barcelona star Lionel Messi and American boxer Floyd Mayweather.

His value to marketers is compounded by his huge presence on social media. He has 74.5 million followers on Twitter, compared with 6 million for Juventus and less than 1 million for Jeep. On Instagram, he has 134 million followers, compared with about 10 million for Juventus.

(BBG) Ronaldo Bid Reports Send Juventus Shares to Four-Month High

(BBG) Shares of Juventus Football Club SpA surged following reports the Italian soccer club is poised to sign five-time Ballon d’Or winner Cristiano Ronaldo.

Current club Real Madrid would consider a fee of about 100 million euros ($117 million) for its record goal-scorer, a fraction of his 1 billion-euro release clause, Spanish sports website Marca reported. The 33-year-old agreed to accept a 30 million-euro salary from Juventus, Spanish newspaper As reported, saying the clubs still need to reach a transfer agreement.

Juventus shares rose as much as 9.7 percent in Milan, the biggest intraday rally since a crucial Champions League winin March for the team that would later crash out in a quarter-final defeat at the hands of its Spanish rival, sealed by a penalty goal from Ronaldo. The stock has climbed 23 percent in the last five days as speculation of a possible transfer gathered pace.

While a fee of the reported amount may seem high for a player in the twilight of his career, it would be a coup for the Turin-based side known as “la Vecchia Signora,” or The Old Lady, given Ronaldo’s global brand appeal as well as his on-field talent.

Ronaldo is a “marketer’s dream” who would entice fresh revenue to Juventus through sponsorships, full stadiums and potential broadcasting rights, Robert Wilson, a lecturer in sports business management at Sheffield Hallam University in the north of England, said by email.

The fee would top the 80 million pounds ($105.8 million) Real Madrid paid Manchester United for the Portuguese star in 2009.

Also the UEFA Champions League’s all-time top scorer, Ronaldo earned $61 million dollars in salary and bonuses last year, plus an extra $47 million via endorsements, according to Forbes, making him the third-highest paid athlete in the world behind FC Barcelona star Lionel Messi and American boxer Floyd Mayweather.

His most recent exploits came at the World Cup in Russia, where he scored a breathtaking hat-trick against Spain in the group stage before Portugal was eliminated by Uruguay in the first knock-out round.

A spokesman for Juventus declined to comment and Real Madrid didn’t respond to an emailed request for comment.

(S-E) Fiat factory workers are angry at Juventus signing Cristiano Ronaldo

(S-EThey are angry that the company, which owns shares in Juventus, have the money to sign Cristiano but not to increase their worker’s wages

After Portugal and Cristiano Ronaldo were knocked out of the World Cup by Uruguay, the striker has been the main focus in the media after being linked with a Real Madrid exit. In the last few days the idea he could end up at Juventus is gathering pace and they’ve moved ahead of other teams such as Manchester United and Paris Saint-Germain.

However, there’s a problem emerging for the Italian side. The car manufacturing giant FIAT owns 29.18% of the Agnelli family’s businesses via Exor N.V., who own the majority of the shares – 63.77% – in Juventus. In fact, Juventus’ current president, Andrea Agnelli, was one of the founding members in the mentioned company, which also includes Ferrari and The Economist Group.

Juventus are willing to pay €100m in transfer fees plus another €120m in wages across his four seasons at the club. This investment of €220m is in order to finally win the Champions League again. However this huge quantity of money has generated a problem for the workers at the FIAT car manufacturing plant. “After Higuain, now Cristiano Ronaldo is coming? It’s embarrassing. The workers at FIAT haven’t had a wage increase in ten years. With Cristiano’s wages, you could give every worker a €200 pay rise. In these ten years we’ve lost 10.7% due to inflation that we’ve never gotten back. And now Fiat Chrysler Automobiles, FCA, is spending €126m annualy in sponsorship, of which €26.5 is for Juventus,” criticised Gerardo Giannone of the DER agency.

(BBC) Italy migrant row: Move to seize two Med rescue ships

(BBC)

Lifeline ship carrying migrants in the MediterraneanImage copyrightEPA
Image captionThe two ships work for the German NGO Mission Lifeline

Italy says it will seize two migrant rescue ships in the Mediterranean, citing doubts over their legal status.

Italian authorities said the Lifeline and Seefuchs, operated by the German migrant rescue group Mission Lifeline, were “illegally” flying the Dutch flag.

The Lifeline is carrying 226 migrants rescued off the coast of Libya, Mission Lifeline said.

Separately, the UN refugee agency has reported that 220 migrants drowned in the same area in recent days.

It called for “urgent action” from EU countries.

Why is Italy seizing the ships?

Italy’s new right-wing government has taken a harder stance on rescue ships bringing large numbers of migrants to Italy, which is often the nearest port for those rescued off coast of Libya.

Italy’s Infrastructure Minister Danilo Toninelli said the ship had broken the law by taking the migrants, even though the Libyan coastguard had already intervened to rescue them.

He said Italy would seize both the Lifeline and the Seefuchs to determine their legal status, and said Italy would “once again save the migrants”.

Interior Minister Matteo Salvini initially said in a post on Facebook that the two NGO ships should “go to Holland”, as it was said to be flying under a Dutch flag, and should not dock in Italy.

Whether or not the ship is Dutch is the subject of some debate. The Dutch delegation to the EU said in a tweet that the ships are not registered in the Netherlands, and not flying under its flag.

Mission Lifeline, however, later posted an image on Twitter of a registration document it says proves the ships sail under the Dutch flag.

The group also tweeted that it had carried out another rescue overnight, though details of how many migrants were accepted- and by which ship – have yet to be released.

The NGO’s co-founder, Axel Steier, denied breaking any laws and defended his organisation’s actions.

“In this situation you can’t wait,” he said. “If you have a rescue you prevent people from dying, from drowning and then you have to make the decisions. You can’t wait until someone has a port for you – you have to act immediately.”

Mr Salvini remained undeterred, writing in a Facebook post on Friday morning that Malta should accept the Lifeline and its passengers – and reiterating that the ship should be seized.

Europe’s rescue row

The planned seizure of the Lifeline and Seefuchs comes amid a deepening row over migrant rescues after Italy’s new populist government refused earlier this month to take in a stranded rescue ship carrying 630 migrants.

The Aquarius eventually sailed to Spain after it was also turned away by Malta. It has now resumed its operations at sea.

Media captionAfter a week of being in the political spotlight, the rescue ship Aquarius is back at sea

French President Emmanuel Macron accused the Italian government of “cynicism and irresponsibility” for refusing to let the Aquarius dock.

Then on Thursday, without referring directly to Italy, Mr Macron attacked the “leprosy” of anti-EU feeling among “friends and neighbours”.

Italy’s new far-right Interior Minister Matteo Salvini hit back at the French president.

“We may be leper populists, but I take the lessons from those who open their own ports. Welcome thousands of migrants and then we can talk,” he said.

A float in Germany depicting the EU migrant crisis February 2018Image copyrightGETTY IMAGES
Image captionThe migrant crisis has caused deepening rifts between EU member states

Leaders from 10 EU member states will meet in Brussels on Sunday to discuss how best to stem the flow of migrants to the bloc.

The Italian government has said it will not sign up to any EU plan unless it makes helping Italy a priority, while Poland, the Czech Republic, Slovakia and Hungary – known as the Visegrad Group – say they will boycott the talks.

Italy’s government wants to deport half a million undocumented migrants, many of whom are housed in squalid reception centres. More than 600,000 have reached Italy from Libya in the past four years.

(BBG) Emmanuel Macron Misses a Chance to Stay Quiet

(BBG) The dispute with Italy over the Aquarius migrant ship was diplomatically inept and hypocritical.

Two weeks before a crucial meeting of EU leaders, member countries are at loggerheads again over immigration. A diplomatic spat between France and Italy’s new populist government shows how difficult it will be for the European Council to strike a meaningful deal at the end of June on topics such as relocating refugees or deepening the monetary union.

The problem is tone as much as substance. So long as politicians keep playing to their domestic galleries, the compromises Europe needs to thrive will remain elusive.

The transalpine rift started when Italy turned away a boat full of migrants, the Aquarius, after Malta had just done the same. Spain eventually said it would welcome the vessel (the boat has currently been re-routed toward the waters around Sardinia because of adverse sea conditions). But the Italian decision prompted furious reactions across the EU. In particular, French president Emmanuel Macron said it was “cynical and irresponsible.” Rome reacted angrily. Its foreign ministry summoned a senior French diplomat for a dressing down. Giovanni Tria, Italy’s finance minister, cancelled a visit to Paris.

There’s little doubt that Matteo Salvini, Italy’s new home affairs minister and leader of the anti-immigration League, used the 629 migrants stranded at sea to score cheap political points. But the reaction from Paris was clumsy – and hypocritical. France has repeatedly turned back migrants who want to cross the Italian border, hiding behind an EU rule that says asylum seekers should be processed in the state where they first enter the bloc.

Italy has punched well above its weight in rescuing migrants from the Mediterranean, receiving precious little help from the rest of the EU. However irresponsible Salvini’s behaviour – and troubling the signal about the populist government’s attitude toward migrants – Macron could have let this one pass.

His reaction was diplomatically inept too. Rome’s new rulers thrive on attacks from abroad, which Salvini and his ilk depict as insults to Italy’s sovereignty. The best course of action, as shown in a recent interview with Olaf Scholz, Germany’s finance minister, is to steer clear of public criticism and simply recall that all countries have obligations to meet. The irony here is that neither Rome nor Paris ended up offering to rescue the migrants stranded at sea. It was Madrid. Macron missed a good opportunity to shut up.

None of this is to exonerate Italy. The continuous lashing out at other countries could take a toll diplomatically. Since the formation of the government, Rome has indulged in angry spats with Tunisia, Malta and France over refugees, and relentlessly criticized Germany about the economy. Tria has been a welcome exception. The attacks may play well at home, but might be counter-productive in the long run.

A lot depends, of course, on what the populists actually want to achieve during their time in power. Maybe the Five Star Movement and League would like to provoke their European partners to such an extent that Italy is pushed out of the EU and the euro zone – creating an “Ital-exit” by the back door. But if that’s not what they have in mind, they need allies rather than sparring partners.

It’s reasonable to want to change the so-called Dublin regulation to achieve a fairer distribution of asylum seekers, but this needs the backing of other countries. On the economy, Italy requires support to bring about more financial risk-sharing across the euro zone, including a joint guarantee on bank deposits and, eventually, a euro zone Treasury. With Germany very skeptical of these plans, Italy’s best hope is Macron and his dreams of closer monetary union.

Unfortunately, the transalpine rift confirms a sad truth about the EU. While countries need each other to find answers to the problems affecting their voters, with immigration among the thorniest trans-national issues, politicians will always pander to their domestic audience. That’s how they win and lose elections.

Yet Britain’s constant sniping at the EU has already helped push that country toward its vote to leave. Without some careful leadership on both sides, this could happen again.

(Politico) Italian PM breaks with EU, backs Trump’s call for Russia to return to G8

(Politico)

LA MALBAIE, Canada — Italy’s new prime minister, Giuseppe Conte, broke sharply with the EU on Friday at his first international summit, and joined U.S. President Donald Trump’s call for Russia to be reinstated to the exclusive club of industrialized nations.

Trump called for Russia’s reinstatement as he left the White House to travel to the G7 leaders’ meeting in Quebec.

The Western powers and Japan ejected Russia from the G8 in 2014 in response to the Kremlin’s invasion, and subsequent annexation, of Crimea.

Conte posted his support for Trump’s view on Twitter, apparently between meetings with European Council President Donald Tusk and European Commission President Jean-Claude Juncker. It’s unclear if Tusk or Juncker were aware of Conte’s statement before their meetings.

At a news conference, Tusk and Juncker mostly sidestepped questions about Conte’s position, saying they expected there would be overall agreement on Russia policy. But they also pushed back on Trump’s suggestion that Russia rejoin the club.

“I see a lot of speculation about G6 plus 1 or G7 minus 1, or G7 plus one,” Tusk said. “But let’s leave seven as it is. It’s a lucky number. At least in our culture.”

Tusk added that the G7 faced enough obstacles in their quest for unified positions without adding Russia back into the mix. Juncker, meanwhile, noted that EU leaders were re-engaging Russia in other formats, such as a recent economic forum in St. Petersburg attended by French President Emmanuel Macron.

But he said Russia still had to be held accountable for its actions.

“As we see it, Russia is in violation of international law because of its annexation of Crimea, equally because of what it has done in the east of Ukraine,” Juncker said. “Over and above that, of course, there are good reasons leaving these factors aside to renew our relationship with Russia and this is something which we intend to do,” he said. “I expect that it will be something we discuss.”

“But,” he added, “we need to take a stand against an aggressive approach and aggressive action on the part of Russia.”

Since Russia’s ejection, Western nations, including the U.S. and all EU countries, have been unified in the need to maintain economic sanctions and other pressure on Russia over its military intervention in Ukraine, in Crimea and in the eastern Donbas region, where the Kremlin continues to support an armed insurgency.

Other G7 powers have not indicated any willingness to ease the pressure on Russia.

Conte’s statement adds further diplomatic chaos to the G7 leaders’ summit, which was already descending into a chaotic war of words on Twitter. Trump on Thursday lashed out at the summit host, Canadian Prime Minister Justin Trudeau, and French President Emmanuel Macron, who criticized Trump for imposing unilateral tariffs on steel and aluminum.

While Trump was still traveling, and expected to arrive late at the summit, his comment calling for Russia to be reinstated is certain to further inflame tensions in Quebec.

On the South Lawn of the White House, Trump claimed to be Putin’s worst nightmare but then said “Russia should be in this meeting. Why are we having a meeting without Russia being in the meeting? And I would recommend, and it’s up to them, but Russia should be in the meeting. They should be a part of it.

“You know, whether you like it or not — and it may not be politically correct — but we have a world to run. And in the G7, which used to be the G8, they threw Russia out. They should let Russia come back in. Because we should have Russia at the negotiating table.” It was unclear what negotiation Trump had in mind.

A spokesman for Russian President Vladimir Putin, Dmitry Peskov, who was on an official trip to China, told reporters Russia was focused “on other formats.”

Other G7 powers have not indicated any willingness to ease the pressure on Russia, and the EU’s foreign policy chief, Federica Mogherini, has worked hard to maintain unity on the issue in Brussels.

Conte’s statement will be especially problematic for Mogherini, who is Italian.

The first draft of the contract drawn up between the two parties in Conte’s government — the far-right League and the anti-establishment 5 Star Movement — contained a line calling for the end of Russian sanctions “immediately.” The text was amended in later versions.

In his first speech in the Italian parliament this week, Conte said that Italy remains a committed NATO partner but he added that “we will promote a revising of sanctions, starting with those that demean Russia’s civil society.”

Yet he didn’t indicate whether this should take place ‘immediately.” That’s because Rome has not yet decided whether to veto the rolling over of the sanctions during a meeting of EU leaders at the end of the month.

“We have to think about it,” said the League’s leader Matteo Salvini on Thursday at a reception at the Russian embassy in Rome.

Russia had been scheduled to host the G8 summit in 2014, and was planning to hold the leaders’ gathering in the Black Sea resort city of Sochi, which was also the site of the Winter Olympics that year. Instead, officials quickly rescheduled the G7 summit for Brussels, the capital of the European Union, which participates in both the G7 and the G20 but normally does not host summits. Russian remains a part of the G20.

An international investigative team led by the Netherlands recently announced that a Malaysian Airlines passenger jet, flight MH17, that was shot down over eastern Ukraine in 2014 was destroyed by a Russian missile supplied by a specific military unit in southern Russia. And France and Germany, the main architects of the Minsk 2 peace accord between Russia and Ukraine, have consistently reported no substantive progress in implementation of the agreement by Russia.

Putin has continued to deny any Russian role in the MH17 incident, in which all the passengers were killed. Putin initially denied that Russian military forces had invaded Crimea but later acknowledged that they had done so, and even bestowed awards on soldiers who participated in the operation.

(ChathamHouse) The EU Must Realize That Populism Is a Symptom of Real Policy Failure

(ChathamHouse) The reaction to the political situation in Italy is another misreading of what is at stake.

Matteo Salvini, leader of the League, speaks to the press on 14 May. Photo: Getty Images.

Matteo Salvini, leader of the League, speaks to the press on 14 May. Photo: Getty Images.

Europe is set to enter a new period of political uncertainty after two populist parties in Italy, the Five Star Movement and the League, agreed to form a new government together. After a week of uncertainty that has spooked markets, Italy, the eurozone’s third and the world’s eighth-largest economy, finds itself run by two populist parties that have in the past expressed deep scepticism of Italy’s membership of the eurozone, as well as opposing EU policies on migration.

Italy is a country where the two major EU crises of previous years cross paths. Italy has suffered both from long-standing economic malaise, made more acute in the years of the eurozone crisis, and a mounting migration crisis in the Mediterranean. In both cases, Five Star and the League have fostered the perception of many Italians that the EU not only failed to help but outright harmed Italy by imposing upon it punishing economic reforms and leaving it without help to manage the influx of refugees on its shores.

Ideally, this would concentrate the attention of EU elites on the effort to overhaul Europe’s economic governance and management of its external frontier, with an eye to developing more sustainable and equitable policies. Italy is indeed the final frontier of the decade-long governance crisis of the EU: a founding EU member, its fourth-largest country and traditionally a pro-European society, Italy faces very real policy challenges that are seen by its electorate as closely intertwined with its membership of the EU and the eurozone.

And yet the populist coalition in Rome has seemed to elicit a different kind of reaction. Political commentators across Europe were quick to frame the Five Star–League partnership as one more episode in the long march of populism in Western democracies. After the defeat of Marine Le Pen in French presidential elections last year gave way to talk that the populist wave might have ebbed, Italy’s potential new government vindicated those who argue populism, illiberalism and even authoritarianism continue to be Europe’s main problem today.

Of course, one cannot deny that these are testing times for liberal democracy in many parts of Europe. To the extent that populism has an ideological belief system, it is its understanding of democracy as a direct and majoritarian mode of political representation that supersedes institutional checks on the will of the many like independent regulators, central banks and the judiciary. Populism can indeed become a threat to democracy if populists in power undermine liberal institutions and enable the emergence of illiberal democracy that can, with time, degenerate into outright electoral autocracy.

Populism today is used not as a signal for necessary policy change but as a convenient excuse to dismiss social demands as incompatible with liberal democracy.

Yet the obsessive focus in much of the political, policy and journalistic debate on populism’s challenge to liberal democracy misses an even more important aspect to the story: that in most cases the rise of populism feeds off very real policy failures and very legitimate popular reactions to them. This is particularly true in a context of continental integration that seems to be increasingly unbalanced between a relatively prosperous and sheltered core of northern and western European states and an increasingly powerless periphery bearing the costs of adaptation to economic hardship and the migration crisis.

Again, the point is not that populism does not challenge liberal democracy in Europe. It is rather that the electoral success of populist parties is not necessarily or even primarily a danger to democracy in all cases. Often the rise of populists reflects obvious policy failures and public frustrations that EU and national elites can ill afford to ignore. After all, very few believed that Five Star and the League would or could institute an illiberal democracy in Italy, a country with a notoriously sclerotic institutional setup that would frustrate any effort at concentration of power.

EU elites and mainstream commentators have long developed the habit of painting all challengers to the European order with the same brush of ‘populism’ and ‘illiberalism’. It is obviously easier to philosophize about the future of liberal democracy from Brussels, Berlin or The Hague than to admit that, for many parts of Europe, participation in structures of economic and migration policy cooperation will soon be politically and socially untenable unless the EU seriously reforms its functioning in the direction of more burden-sharing and solidarity.

The real challenge that the populist coalition in Italy poses to the EU is one of policy, not of democracy. Yet conflating the latter with the former has long allowed EU elites and governments of Europe’s northern core to divert the conversation from their own obligations while holding the moral high ground as defenders of liberal democratic norms. Not unlike socialism in the 19th century and communism in the 20th, populism today is used not as a signal for necessary policy change but as a convenient excuse to dismiss social demands as incompatible with liberal democracy.

Given the size of its economy, popular dissatisfaction with domestic and European elites, and the urgency of the migration crisis on its shores, Italy is the biggest test yet for this elite tactic of dismissal and diversion – moving the discussion from popular frustration to an often barren and prevaricating debate about the ‘future of democracy’. The question is whether the EU can realize the stakes in time and engage with the real policy failures that lie at the heart of the current democratic malaise in Europe.

(P-S) All Eyes on Italy – Dominique Moisi

(P-S) The emergence of a populist government in Italy directly affects France and its ambitions for European reform. With a politically weakened Germany, a hostile Eastern Europe, and a largely paralyzed Spain, French President Emmanuel Macron, a firm believer in the European ideal of “ever closer union,” risks isolating his country.

PARIS – “We in France should take Italy much more seriously than we do. There is a lot we can learn from this highly successful country.”

That may sound like a quote from centuries ago, not from 2015, when France’s ambassador to Italy was praising and pleading very legitimately for the land of Dante. The following year, in the wake of the United Kingdom’s Brexit referendum, Italian journalists asked me whether their country could replace the UK in Europe’s informal “Club of Three” leading European Union member states, together with Germany and France.

Now, however, that recent mixture of confidence and hope has vanished under the crushing weight of political reality. Today’s Italy may be the leading contender for the title of “sick man” of Europe. One could even see the country as a metaphor, if not a synopsis, of everything that has gone wrong in Europe.

Italy seems to duplicate two cleavages that are currently weakening Europe: the North-South rift on economic matters, and the East-West divide on values. The North-South divide does not have only economic or cultural significance in Italy’s case. It is also reproduced on the political map of Italy itself. In the general election on March 4, support for the two parties that have just formed a government– the Five Star Movement (M5S) and the League party (formerly the Northern League) – was concentrated in southern and northern Italy, respectively.

But there is also within Italy something like an East-West division, this time not between the M5S and the League – the top two parties in March – but between them and the traditional center-left and center-right parties that they handily outperformed.

The rest of Europe – particularly my own country, France – tends to ignore Italy when things go well and to underestimate the potential consequences when things go badly. This time, however, things are going so badly in Italy it is impossible to minimize the consequences.

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For the first time, a coalition of anti-system, anti-European political forces has come to power in a founding member of the EU. Italians have crossed the political Rubicon at a time when their choice could affect – in the most negative manner – the evolution of the entire European project. To put it bluntly, if a country in Europe’s South moves to the East by following the model of Hungary or Poland, it is not only the North, but the entire West that will suffer from illiberal democracy’s gain.

Let us be clear: the danger is not that Italy is about to leave the EU, the way the British are doing. A majority of Italians are not ready for it. The danger is that, like Hungary and Poland, it will remain but ignore EU rules and flout its values.

That said, condemning Italy for its sins is neither fair nor useful. The rest of Europe, France in particular, bears at least some responsibility for the outcome of Italy’s election in March. Italians have rightly felt abandoned by their fellow Europeans when they were confronted with the arrival of masses of refugees. And they did their human duty in a dignified way, with the help of a civil society that could be considered a model for many other countries.

As a consequence, however, the men and women who were in power when Italy greeted more than 600,000 refugees lost the elections. They were punished for having done the right thing and for having done it alone, which made them look like dangerously naive idealists at best, and like inefficient bureaucrats at worst.

But getting France to recognize its share of responsibility (together with others) is one thing; acquiescing in a founding EU member’s decision to break the rules is another. A strong deterrent mechanism, such as the possibility of expulsion for members that deliberately ignore EU values and rules, does not and will not exist in Europe’s current state. When Jörg Haider’s far-right Freedom Party joined a coalition government in Austria in 2000, the EU applied sanctions for too short a time.

There is no longer any room for such indifference. What is happening in Italy directly affects France and its ambitions for European reform. With a politically weakened Germany, a hostile Eastern Europe, a largely paralyzed Spain, and now the likelihood of a populist government in power in one of Europe’s founding members, France and its president, Emmanuel Macron, a firm believer in the European ideal of “ever closer union,” risk being in a position of “splendid isolation.”

How long France would remain there is anyone’s guess. What happens in Italy today could prefigure what happens tomorrow in France, with its stronger state and a weaker civil society. The French ambassador was right: France should take Italy more seriously. But not for the wrong reasons.

(BBG) Italy’s Extraordinary $146 Billion Experiment

(BBG) Italy’s new government is one of the most extraordinary democratic experiments tried in western Europe since the Second World War.

The Five Star Movement and the League have put together a largely inexperienced ministerial team, which is promising a set of policies that seem impossible to deliver. They face formidable constraints, from Italy’s fragile public finances to the EU rules that Rome must abide by. It’s only fair that the two parties have their shot at governing, but it’s hard to see how they can succeed.

Italy will be led by a prime minister, Giuseppe Conte, whom most Italians have never heard of. His two deputies – League leader Matteo Salvini and Five Star’s Luigi Di Maio – will be his political bosses. The two anti-establishment parties have worked hard to reconcile their differences and put together a draft coalition agreement. But it’s hard to see how they won’t pull Conte in different directions on a number of issues, including whether Italy’s priority should be cutting taxes or lifting spending for the most vulnerable.

The cost of the coalition agreement is up to 125 billion euros ($146 billion), according to independent estimates. And yet, Italy’s sovereign debt is among the world’s largest. Investors and the rest of the euro zone will be watching intently when the new government presents its first budget in the autumn. Expect tensions. Italy’s financial constraints will inevitably bite and the two parties will squabble over what pet projects to prioritize.

The last-minute reshuffle of the top team has at least reassured investors and European partners. Enzo Moavero Milanesi, a seasoned law professor and EU expert, will be foreign minister. Bizarrely, for an avowedly anti-elitist administration, he has worked before in a technocratic government led by Mario Monti.

The finance minister, Giovanni Tria, is a little-known academic whose unorthodox views will raise German hackles. For example, he argued last year that the European Central Bank should pay for state funding of investment, so long as governments kept other spending under control.

However, his views on Italy’s euro membership seem more moderate than those of Paolo Savona, whom the president vetoed as finance minister and who’s been moved to EU affairs. Tria still needs to show his true colors but, unlike Savona, he has never drafted a “Plan B” to leave the euro in secret.

Other ministers are more of a worry. As minister for labor and economic development, Di Maio will take charge of Italy’s industrial policy and reforming its labor code, even though he lacks any real business or administrative experience. He has vowed to punish companies that close their Italian plants and move production abroad, but it’s unclear how. The risk is a clash with Brussels over strict rules on state aid.

The mood among investors has nevertheless improved after a rocky week; bond yields have moved sharply lower and Italian stocks higher. The chief reason is President Sergio Mattarella’s veto of Savona’s appointment as finance minister, which shows he won’t let Italy sleepwalk out of the euro without a popular mandate for an “Ital-exit.” This lessens the “re-denomination risk” on Italian assets.

Meanwhile, we avoid (for now) a fresh election that would have been seen as a referendum on Italy’s membership of the single currency. At the very least, the Five Star-League coalition contract includes no reference to quitting the euro and the party leaders have moderated their views of late.

Still, a fundamental question persists. That 125 billion euro-spending plan is entirely incompatible with existing euro zone rules and will set Italy on a collision course with Brussels and its European partners. So how will the new government react when these constraints are enforced? Will the coalition stick together or splinter? Italy has a government, but it is unclear how long it will last. The political drama in Rome will go on.

(Reuters) In Italy’s ‘Plan B,’ euro-skeptic and their currency ideas take center stage

(Reuters)If Italy leaves the euro, it will be late on a Friday night.

Government officials will have planned the move in the utmost secrecy, telling their European partners only that same evening while simultaneously ordering the shutdown of banks and financial markets to prevent a stampede of capital out of the country.

This is “Italy’s Plan B,” an eye-popping contingency scenario drawn up by the team at a website specializing in economic issues, for how the eurozone’s third-largest economy should go about returning to the lira if necessary.

The 80-page booklet was overlooked when it first appeared in October 2015, and would ordinarily have stayed that way.

But then one of the best-known contributors to the website, 81-year-old economist Paolo Savona, was put forward as a candidate for economy minister under the new anti-establishment coalition between the right-wing League and the 5-Star Movement.

The government forged on Thursday has since relegated Savona to the more junior European affairs portfolio after the head of state refused to allow an arch-euroskeptic to occupy the key economics ministry.

And inside the League, which is dominant in the wealthy Lombardy and Veneto regions in the north, sources say there are no signs of anxiety that leader Matteo Salvini would ever risk the chaos of pulling the country out of the single currency.

Nevertheless, “Plan B” remains on the list of compulsory reading for those seeking to understand the intellectual foundations of the new coalition.

Salvini, the new interior minister and a deputy prime minister, has been particularly instrumental in bringing Savona and several other euroskeptic economists and their ideas out of intellectual obscurity and into the Cabinet for the first time, people familiar with the situation said.

New Economy Minister Giovanni Tria, economics professor at Rome’s Tor Vergata University, was not involved in outlining “Plan B,” but he, too, is no fan of the euro.

Last year he wrote that “not even European Central Bank President Mario Draghi is right when he says the euro ‘is irreversible,’ unless he clarifies the conditions and timings of the reforms needed to save the euro.”

On Friday night, however, said that he “never said that Italy must leave the euro.”

“A debate on how to reform Europe is going on all over the bloc, and in Italy too. There is no political force in Italy that wants to leave the euro,” he added.

Salvini has cited euroskeptic thinkers who characterize the currency union as a form of monetary “slavery” — a view not promoted by the League and its heavily business-based supporters until he became its head in 2013.

“Euroskeptic economists have been very able to build up a consensus on social media. Thanks to Salvini, they have now emerged from the academic shadows,” said Riccardo Puglisi, a political economy professor at the University of Pavia and one of the most vocal critics of the idea of leaving the euro.

Another economist who has moved into Salvini’s intellectual circle is Alberto Bagnai, who entered parliament as a senator for the first time in the March 4 elections.

An associate professor in economic policy at Gabriele d’Annunzio University, Bagnai published “Il tramonto dell’euro” (“The Sunset of the Euro”) in 2012, a book considered by Salvini as a must for any library.

In it, Bagnai described the euro as “an economic monster” and German Chancellor Angela Merkel “as intransigent as a League member” for advocating austerity for recession-hit European countries during the global financial crisis rather than letting them spend more to support internal demand.

At the center of Salvini’s euroskeptic circle is League economics policy chief Claudio Borghi, an economist and former managing director of Germany’s Deutsche Bank who just before 2014 European election wrote “Basta euro” (“Enough Euro”), the party’s policy on the single currency.

In it, Borghi claimed the European single currency would inevitably come to an end and expressed his hope that this would happen sooner rather than later.

Savona did not respond to requests for comment. Bagnai did not comment. Borghi said he was an economist coming from the business world rather than academia.

Economists in favor of leaving believe that a devalued currency would revive Italy’s exports and that by throwing off the shackles of EU fiscal rules the country could ramp up public spending to boost growth and create jobs.

Salvini’s outspoken attacks on the fiscal rules governing the eurozone, which Italy agreed to in the 1992 Maastricht Treaty, appear to be polling well with Italian voters who traditionally have been among the strongest supporters of the single currency.

But few inside the League believe he would ever take the plunge and pull the country out of the currency.

“The League’s leaders are radical but not mad. In the era of social media, strong language helps to attract followers on the web, but we are in good hands,” said a longtime member of the party who was not authorized to speak publicly on the matter.

Those who want to stay in the euro say that leaving it would trigger a surge in interest rates and inflation, capital flight, a banking crisis and possibly a default on Italy’s public debt.

(Reuters) Stocks rise, bond yields fall as Italian political deadlock ends

(Reuters) World stocks rose and bond yields fell on Friday as investors welcomed an apparent end to a political crisis in Italy, although prospects of a full-blown trade war put a dampener on gains.

The MSCI All-Country World index .MIWD00000PUS, which tracks shares in 47 countries, rose 0.2 percent. It was set for a third week of losses however, dented earlier in the week by risks of a snap election in Italy.

Late on Thursday, leaders of Italy’s anti-establishment parties revived coalition plans, apparently ending three months of political turmoil.

Italian stocks rallied 2.6 percent .FTMIB, the standout performers in Europe. The political crisis knocked more than 9 percent off the Italian benchmark in May, its worst months since June 2016. The pan-European STOXX 600 rose 0.7 percent. [.EU]

Borrowing costs in Italy also fell sharply. Italian two-year yields, which soared to five-year highs above 2.7 percent on Tuesday in a throwback to the euro debt crisis, retreated back to Monday’s levels.

Events in Italy pushed peripheral euro zone bond yields down for a third straight day [GVD/EUR], as investors also kept an eye on a second southern European state, Spain, where Prime Minister Mariano Rajoy set to be forced out of office by a no-confidence vote.

“We’ve had a rude awakening of European political risks this week, so the potential fall of the Spanish government would cause volatility but the situation in Spain is very different from Italy,” said Michael Metcalfe, head of global macro strategy, State Street Global Markets.

“The parties leading in the polls in Spain are centrists so we’re not getting the proposals for fiscal extremes as we have in Italy.”

RENEWED TRADE TENSIONS

Of potentially greater concerns to investors was the renewed prospect of a global trade war after the United States imposed steel and aluminum tariffs on Canada, Mexico and the European Union.

The news pushed Wall Street lower overnight and set the initial tone in Asian stocks, though a weaker yen supported Japanese stocks and firm exports boosted South Korean markets.

MSCI’s broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS rose 0.1 percent but the index was still down roughly 0.6 percent for the week, reflecting earlier concerns about Italy’s struggle to form a government that drove it to a six-week low.

Equity markets are likely to feel pressure, said Soichiro Monji, senior economist at Daiwa SB Investments in Tokyo, “as the United States has opened up a new point of contention on the trade front by getting involved with the European Union.

.FTMIBFT-SE INTERNATIONAL
+518.56(+2.38%)
.FTMIB
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“President (Donald) Trump has not accomplished very much in terms of trade issues and is likely to remain vocal with the U.S. mid-term elections coming up”.

The Shanghai Composite Index .SSEC fell 0.5 percent and the blue-chip CSI300 index .CSI300 dropped 0.75 percent.

Traders said Chinese stocks were volatile as the long-awaited inclusion of large-cap shares from the country in MSCI’s emerging markets index had failed to buoy the market or attract immediate flows of foreign money. .SS

On Friday, about 230 yuan-denominated mainland A-shares were included in MSCI index for the first time. Bank of America Merrill Lynch estimates China’s A-shares could account for some 30 percent of MSCI’s emerging market index once they are fully included.

In currencies, the Canadian dollar CAD=D4 and the Mexican peso MXN=D2 were flat, recovering from Thursday’s falls after the U.S. decision to impose tariffs.

The euro was flat, while the dollar climbed 0.3 percent to 109.140 yen JPY=, supported by U.S. yields reversing overnight declines. The dollar index, which measures it against a basket of currencies was up 0.1 percent. .DXY [FRX/]

The 10-year Treasury yield US10YT=RR was at 2.871 percent after brushing a 1-1/2-month low of 2.759 percent on Tuesday.

Brent crude LCOc1 rose 0.2 percent to $77.70 a barrel. U.S. crude rose 0.2 percent to $67.19 a barrel CLOc1. Brent’s premium over U.S. crude reached its widest since March 2015 this week.

(Reuters) Italy’s 5-star, League renew efforts to form a government: source

(Reuters) Italy’s anti-establishment 5-Star Movement and far-right League have renewed efforts to form a coalition government after the president rejected their eurosceptic economy minister pick at the weekend, a 5-Star source said on Wednesday.

The parties are trying to find “a point of compromise on another name” for the economy ministry, the source said.

The coalition may also be widened to include another right-wing party, the Brothers of Italy, the source added.

+++ (BBG) Italy May Be Cut by Moody’s on Concerns Over New Government

…No wonder…

(BBG) Italy’s rating may be cut by Moody’s over concerns about the new government’s fiscal plans and the risk that some important past measures, such as pension reform, might be reversed.

While “some of the coalition parties’ original proposals have been modified in the final coalition agreement, they would still lead to a weaker, not a stronger, fiscal position going forward,” the agency said in a statement Friday. “So far, Moody’s has assumed a gradual deficit reduction over the coming years, which in turn would allow for a very gradual decline in the public debt ratio.”

Italy’s public debt stood at 2.3 trillion euros at the end of March, according to the nation’s central bank. With the second-biggest public-debt ratio in the euro zone, pledges by the new government of increased spending have unsettled financial markets. The Italy-Germany 10-year yield spread reached the widest since 2014 earlier Friday.

“Far from offering the prospect of further fiscal consolidation, the ’contract’ for government signed by the two parties includes potentially costly tax and spending measures, without any clear proposals on how to fund those,” Moody’s said.

Italy is currently rated Baa2 by the agency, the second-lowest investment-grade rating.

The Five Star Movement and League party have published a coalition government plan that includes reviewing fiscal policy, bail-in rules and Basel banking accords. Italy Premier-Designate Giuseppe Conte said Thursday that protecting savers hit by bank failures is a priority and “those who have suffered fraud or have been deceived will be refunded.” Analysts and investors worry that the measurescould slow the reduction of bad debt and hit banks’ valuations.

(NYT) Italy’s Populist Parties Agree on a Common Agenda to Govern

(NYT) ROME — After more than two months of political deadlock, Italian populist parties announced on Friday that they had agreed on a common platform for governing that would allow them to push ahead with a potentially budget-breaking and anti-immigration agenda that seeks to adjust Italy’s relationship with Europe.

The document diluted some of the most antagonistic policies toward the European Union that were leaked in an earlier draft agreement and rattled Italy’s financial markets this week.

But it nonetheless preserved the core of the populist promises that won the anti-establishment Five Star Movement and the hard-right League party 50 percent of the vote in inconclusive March elections.

Both parties said they will now put the document before their bases for approval. But the most important vote will be that of President Sergio Mattarella, who has the authority to block the formation of the government if he believes it is unconstitutional.

Mr. Mattarella has reportedly been concerned that the populist government could further unbalance Italy’s budget and break its international treaties. The parties will next need to agree on a choice for prime minister, which is also subject to Mr. Mattarella’s approval.

The party leaders — Matteo Salvini, 45, for the League and Luigi Di Maio,31, for Five Star — are likely to meet with the president to seek his approval early next week.

With that clearly in mind, the document, titled “Contract for a Government of Change,” seems intended to walk a fine line between appeasing Mr. Mattarella’s concerns while throwing enough red meat of populist programs to the parties’ supporters.

Even so, there is no guarantee that, once in power, the parties will not revert to the anti-European agenda that seems closer to their heart.

“It’s not binding,” said Michele Ainis, a professor of constitutional law at Roma Tre University. “Whatever they do after can be different, can be more or less radical.”

It was the prospect of a changed, and more adversarial, relationship between Italy and Europe that shook markets this week.

In Friday’s final agreement, the parties set aside a previous desire to return to status quo before the European Union treaty that set the stage for the euro.

The final agreement instead emphasized that they wanted to “review the structure of European economic governance” and return to the original spirit of the union, which is now “asymmetric, based on the dominance of the market rather than the broader social and economic dimension.”

The 57-page document covered areas from public water to defense and from sports to the safeguarding of animals, from countering the Mafia to boosting Italian fishermen and farmers.

More innovatively, it included a promise that each party would support the priorities of the other in Parliament and called for the establishment of a reconciliation committee to iron out eventual differences.

An earlier iteration of such a committee, which foresaw a mix of private citizens and lawmakers, struck many observers as unconstitutional. They believed that it created the potential of unelected power brokers operating in a shadow cabinet, an arrangement that for some critics evoked the Grand Council of Fascism during Mussolini’s reign.

Analysts also said the agreement’s section on conflict of interest maintained the status quo, meaning that it was unlikely to worry Silvio Berlusconi, the media mogul and former prime minister, who is an ally of Mr. Salvini.

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Matteo Salvini, the leader of the far-right League, said his party will set up “gazebos” in piazzas around the country for members to vote on the agreement.CreditItalian Presidency, via EPA, via Shutterstock

The document also failed to address directly the role of Davide Casaleggio, a web consultant and Five Star power broker whose Milan office houses the web platform where the Five Star Movement’s voting activity takes place.

The agreement also reflected the Five Star Movement’s disdain for members of Parliament switching parties out of personal convenience and ambition. It proposed “a form” of a requirement that lawmakers remain with the party with which they were elected “to counteract the always growing phenomenon of party switching.”

Critics, while allowing that the party switching is often unsavory, have nevertheless called the proposal a grave threat to Italy’s representative democracy. They argue that such a rule could lead to demands that lawmakers vote in sync with their party, and that it strips the lawmakers of the ability to vote their conscience, thus putting loyalty to the party above loyalty to the Republic.

The Five Star Movement, which has little reverence for Italy’s representative democracy and advocates for direct democracy through clicks on the web, currently seeks to impose a fine of more than 100,000 euros, about $118,000, on lawmakers who leave the party after election.

On Friday, the leaders of the two parties did their best to put a smiling face, at times literally, on the document as they began reassuring their respective bases.

“Days and nights of work, many points from the program of the League and the center-right in this ‘Government Contract,’ ” Mr. Salvini wrote on Twitter, with a smiling emoticon.

“Enough of the lies from the newspapers and TV, here is the reality: Do you like it??” he added.

Mr. Salvini said that his party will set up “gazebos” in piazzas around the country where League members can vote on whether to approve the agreement.

Five Star’s Mr. Di Maio also put forward a happy face.

“I’m really happy,” he said in a Facebook video to his supporters on Friday morning. To inspirational music and footage from the campaign trail, Mr. Di Maio said that the contract “bonds two political forces that are and will remain alternative” and who would keep their promises.

The program addressed the concerns of young people “of my generation,” the 31-year-old said, urging his party’s members to “read this document and feel part of the wave of change that’s about to smash against the hopes of those who want things to stay as they are.”

Five Star campaigned heavily on a universal basic citizens’ income, a pie-in-the-sky proposal that was nonetheless critical to its resounding success in the country’s economically disadvantaged south.

But on closer inspection, the proposal in the agreement seemed more like a traditional unemployment benefit tied to job searches and the means of the recipient.

The program was not exactly the picture of fiscal conservatism.

The Catholic University of the Sacred Heart in Milan issued a budgetary assessment of the proposals, estimating their cost at as much as €125 billion. The parties, according to the university study, cut only €500 million in spending to cover those costs.

Echoing Mr. Salvini’s remarks a day earlier, Mr. Di Maio also took a disdainful tone toward the foreign news media (The Financial Times this week compared the new alliance to “barbarians” inside Rome’s gates).

He mocked the potential repercussions of the alliance’s plans, including on the spread between German and Italian bond yields. He said that if his party’s members gave an online green light for him to sign the document, he would sign, “despite the spread.”

To boost support for the agreement in the web-native party, Mr. Di Maio signed off by telling his membership that they should “feel proudly Italian today because a new era is about to start.”

Before that era started, though, Mr. Di Maio needed the party members to vote yes on the Five Star’s Rousseau web platform. The necessity of such a vote had been made clear last week during remarks made in the Senate by Mr. Casaleggio, the son of the party’s late co-founder.

Critics say Mr. Casaleggio’s role is indicative of the party’s secretive, top-down power structure and that Mr. Di Maio would not have gotten to this stage in the political negotiations if Mr. Casaleggio were not already on board, rendering any vote on the agreement a fait accompli.

Asked whether the Five Star referendum on the agreement would be certified by a third party, as the party has promised in critical elections, a spokesman for the Five Star Movement did not return a request for comment.

(Economist) An Italian populist government looks likely, and risky

(Economist) A coalition of the Northern League and the Five Star Movement could send the country off the rails.

LUIGI DI MAIO (pictured, left) is only 31, but as leader of the Five Star Movement (M5S), he is poised for a decisive role in Italy’s next government. After coming first in the general election on March 4th, the M5S appeared close this week to sealing a coalition agreement with the far-right Northern League and its leader, Matteo Salvini (pictured, right). That would give Italy, and western Europe, its first all-populist government. Mr Di Maio, a university drop-out, is known for his grammatical howlers, but he can concoct a good soundbite. “Obviously, history is being written,” he declared on May 13th, as he left another round of the interminable coalition talks. “So it takes a bit of time.”

One problem the two sides had not resolved, as The Economist went to press, was finding a prime minister. (A possibility was that each party’s choice might serve half a term.) Yet the programme on which they were toiling may indeed be historic. If they can agree, one of the European Union’s most important states will have a Russophile government bent on challenging the constraints of the euro zone. An M5S-League coalition would be eccentric, idealistic, tinged with xenophobia, intolerant of corruption and economically illiberal. If the two anti-establishment parties fail to agree, the outlook will be no less uncertain. It will mean either new elections, or a technocratic government lacking the authority to implement necessary reforms.

Small wonder that signs of disquiet are emerging in Brussels. The vice-president of the European Commission, Jyrki Katainen, warned that Italy will get no exemptions from the euro zone’s fiscal rules. His colleague, Dimitris Avramopoulos, hoped that the government would not change Italy’s stance on migration. Mr Di Maio and Mr Salvini reacted indignantly.

Markets have begun to worry, too. On March 16th the spread in yields between Italy’s ten-year government bonds and those of Germany jumped to more than 1.5 percentage points. In a statement intended to reassure investors, the two party leaders said they had decided “not to call into question the single currency”. But a draft of their government programme leaked to the Italian edition of Huffington Post, a news website, showed that until two days earlier they had been doing just that. It called for procedures to allow member states to leave the euro and “recover their monetary sovereignty”. It also foresaw the immediate scrapping by Italy of all sanctions against Russia. Far from being a threat to Western democracy, Mr Putin’s domain would be a “strategic interlocutor”.

In the latest draft, the parties’ most controversial proposals have been watered down. The League’s electoral pledge of a flat 15% income-tax rate has acquired another band at 20%. It may be introduced only partially and gradually. The M5S wants what it calls a “citizenship income” of €780 a month, but this will apparently be available only to job-seekers and the most needy; it will not be introduced before 2019. Yet both parties still appear bent on undoing pension cuts introduced in 2011 as a sign of Italy’s determination to get a grip on its public finances. That raises the question of how to avoid adding to the public debt, which stood at 132% of GDP by the end of 2017. Oxford Economics, a consultancy, thinks the pension roll-backs would run to €15bn a year. The tax cuts and citizenship income could well cost more.

Plans to finance these proposals seem shaky. The earlier draft imagined cutting five percentage points of GDP from the national debt by “selling” the Treasury’s portfolio holdings to the institution that invests Italians’ postal savings—which is controlled by the Treasury. Ten more points would have come from securitising and marketing publicly owned property. The negotiators have wisely dropped their assumption that the ECB would obligingly forgive €250bn in Italian bonds acquired through its programme of quantitative easing, though they hope for some debt cancellation across the euro zone.

Even more worrying is the parties’ indifference to Italy’s central economic weakness: low productivity growth. Few of the measures in the draft would boost competitiveness. Indeed, the earlier draft promised small businesses protection from “the liberalisation of working hours, the rapid expansion of large retailers” and the EU’s directive on deregulating services. The parties seem committed to taking on corruption. But swifter civil justice, which Italy urgently needs to secure foreign investment, does not seem to be a priority.

Until this week markets had been calmed by the economy’s relative solidity. Italy’s GDP grew by 1.5% last year and the health of its banking system has improved. The ECB is keeping the interest rates on Italy’s debt low, and much public debt is now held either domestically or in Frankfurt, lowering the risk of big price movements.

Coalition of the wishful thinkers

Another factor is the expectation that EU rules and fear of upsetting markets will deter radical change. Analysts at Unicredit, a bank, point to Portugal and Greece, where populist governments toned down their policies when faced with reality. But Italy’s new government may be an exception. The League resembles other populist-nationalist parties such as France’s National Front. The M5S is a very different creature, launched in 2009 with a mission of introducing direct democracy through online voting. As it has snowballed, it has gathered a heterogeneous mix of policies and activists from left and right alike.

One remaining area of disagreement between the two parties is infrastructure. The League would like to see big investments to create jobs. That is anathema to the environmentalist M5S, one of whose negotiators cut her teeth in a campaign to stop a high-speed rail link to France. The coalition talks have shown that Italian populism comes in radically different forms. If the marriage of the M5S and the League goes ahead, it may be stormy.

+++ (BBG) Italy’s Post-Election Mess Laid Bare in Day of Chaos and Clashes

…A big mess Italian way…

(Bloomberg) — The challenge of constructing a workable
majority in an Italian parliament contested by two populist
groups and Silvio Berlusconi became clear Wednesday as so-called
allies swapped mixed messages and veiled barbs.
The day began with reports of a blow up between 81-year-old
Berlusconi and his coalition partner Matteo Salvini of the anti-
migrant League and ended with Berlusconi trying to damp down
talk of a deal to bring the anti-establishment Five Star
Movement into government. In between markets were roiled by talk
of a populist pact between Salvini and Five Star. Italy stocks
were the worst performers in Europe, losing 1.1 percent.
In a situation offering investors only a slim chance of a
positive outcome, an alliance between the right-wing
nationalists of the League and Five Star’s Luigi Di Maio would
be the worst scenario of all since their main areas of agreement
are ramping up government spending and stirring up trouble for
the European Union.
Read more: Four Ways Out of Italy’s Political Gridlock
That prospect became more likely on March 4 when the League
supplanted Berlusconi’s Forza Italia as the biggest group within
their center-right coalition, putting the rabble-rouser Salvini
in the box seat.
Their coalition is the biggest group in parliament overall,
though Five Star is the largest single party. Both groups claim
they’ve won the right to lead the next government, but neither
has a majority. A handful of seats are still to be awarded as
courts consider the result.
At a meeting in Berlusconi’s Rome residence to thrash out
coalition strategy Tuesday night, Salvini and Berlusconi clashed
over the idea that Salvini might seek support from Five Star for
his prime ministerial ambitions, according to a report in La
Repubblica newspaper.
“Do it, go ahead and do the government with the grillini,”
the newspaper quoted Berlusconi as saying — “grillini” is a
nickname for Five Star members, derived from its co-founder
Beppe Grillo. “We’ll go into opposition, we can’t wait to
denounce your betrayal of the voters.”
Berlusconi’s office said there had been no tension at the
meeting while Salvini’s office said the encounter was positive
and cordial.
All the same, Berlusconi’s surrogate Antonio Tajani gave an
interview to RAI radio during the morning in which he echoed his
boss’s rhetoric. The head of the European Parliament, tapped by
Berlusconi as a potential prime minister before the election,
said the League wouldn’t do a deal with Five Star because some
of their lawmakers had been elected with Forza Italia votes.
“They would never betray the commitment they made to
voters,” he said.

Talking to Five Star?

When Salvini spoke to reporters in Rome during the
afternoon, he initially suggested a deal with Five Star was
still on the table.
“I can rule out that the Democratic Party will be included,
they have been defeated,” he said. “Apart from the PD, all the
rest is possible.”
But when pressed he insisted he’d only do a deal with Five
Star if his coalition allies including Berlusconi backed it.
“It will be the coalition that decides,” Salvini said. “If
others approach us, we will speak about it as a coalition, not
as individual parties.”

Berlusconi’s Proposal

Around the same time, Berlusconi spoke to reporters as he
prepared to meet his lawmakers and slapped down the idea of
cooperating with Five Star.
“I opened the door to them to chase them away,” he said.
Attacks on Five Star were a mainstay of Berlusconi’s election
campaign, during which he called them “a sect.”
Berlusconi told the lawmakers that he was trying to
persuade Salvini and Giorgia Meloni, of the far-right Brothers
of Italy party, to consider a center-right government with
support on specific measures from the Democrats, according to
newswire Ansa.
The ruling PD suffered its worst-ever result in the
elections. But with parliament split between three blocs, both
the League and Five Star have been exploring the possibilities
of some kind of deal.
One thing that was settled was a mandate for Salvini to
talk to Di Maio and other leaders about the election of
parliamentary speakers later this month. That process is due to
begin from March 23 and will provide a first clue to possible
new alliances in the legislature.