Italian premier Matteo Renzi is central to the maneuvering for the European Commission presidency. Photo: Getty
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Don't overlook Italy's PM in the European Commission power struggle

The tussle for the European Commission top-spot isn't just Cameron vs Juncker's supporters; Matteo Renzi, the Italian prime minister, is a key broker.

The hubbub and soap opera of who gets the European Commission presidency may have centred on a power struggle between David Cameron and the supporters of Jean-Claude Juncker, but it would be a mistake to overlook the rise of another man – Italian prime minister Matteo Renzi.

Renzi has only been in post since April, but by tying his support for a Juncker presidency to whether the conservative spitzenkandidat will agree to loosen the EU’s budgetary rules, he has emerged as a key broker.

He also has a strong hand to play. Renzi’s Democratic party scored a decisive victory in May’s European election poll, taking 31 of Italy’s 73 MEP seats, and he has strong support among public opinion and his government.

The EU’s stability and growth pact requires governments to keep budget deficits below 3 percent and debt levels to 60 percent. But despite years of austerity most EU countries have barely managed the 3 percent deficit limit, while average debt ratios have soared to over 90 percent of GDP.

It is unclear whether Renzi will demand a re-write or merely a generous reinterpretation of how the rules are applied, but the direction of travel is clear.

And it is gaining support.

Earlier this week, German economy minister and social democrat party leader Sigmar Gabriel, called on the implementation of the deficit rules to be relaxed, commenting that “countries that are embarking on reforms must have more time to cut their deficits, but it has to be binding.”

“This is what we intend to put up for debate in the weeks and months ahead as part of a reorganization of European policy,” he added.

Gabriel was quickly slapped down by Angela Merkel, and his boss in the finance ministry Wolfgang Schaueble, who insisted that 3 percent limit offers enough flexibility.

Meanwhile, Herman van Rompuy’s office were forced to scotch rumours that the European Council president was preparing a joint paper with Renzi on the issue.

But for all that, there is also sympathy among some EU officials with the difficulties faced by Italy and other countries, who are forcing through unpopular labour market reforms but are strait-jacketed by the pact’s rules from targeted stimulus measures.

As a result, both countries are locked into vicious spirals. Despite keeping within the EU’s deficit rules, a two year recession has pushed Italy’s debt burden to an eye-watering 130 percent, second in size only to Greece. There is also an awareness that as the bloc’s second and third largest economies, France and Italy fall into the ‘too big to fail’ category of countries in the eurozone.

But it was inevitable that the issue would be returned to. In 2010 and 2011, when the eurozone debt crisis was at its bleakest, many politicians were prepared to commit themselves to anything that made them look tough on deficits and tough on the causes of deficits.

The main ideological battle that was waged on these reforms, and ultimately won by Europe’s right back in 2011 and 2012, was on whether to give preferential treatment to public investment targeted at education, research and infrastructure projects.

Critics say that this so-called ‘golden rule’, encourages creative accounting and that the 3 percent threshold gives governments sufficient flexibility.

In contrast, the Keynesian school of thought argues that the 3 percent deficit limit enshrines austerity that, in many cases, will cause an economic recession to be deeper than need be. In the short-term spending cuts may help balance the books, but without investment they won’t lead to recovery.

But it is not just centre-left politicians who are clamouring to re-write the rules, or at least reinterpret the way they are applied. Conservatives in much of southern Europe find that years of pushing through painful austerity programmes have done little to improve their economic prospects.

That Renzi is spearheading this campaign alone is also indicative of France’s decline. When Francois Hollande became only France’s second Socialist president to be elected since the Fifth republic began, it was expected that he would become a badly needed figurehead for the European left, and a counterbalance to Berlin.

It has not happened. Instead Hollande has lurched between domestic election defeats and ever declining personal ratings. Struggling to meet its budget targets despite being given a two year extension, France would be one of the main beneficiaries from a loosening of the EU’s fiscal rules. But its voice post-European elections has been silenced.

Renzi’s gambit may not secure an immediate policy change, but it highlights his status as the leading centre-left politician on the EU stage, and is an important mark in the sand ahead of Italy’s six month presidency. His timing could hardly be better.

Photo: Getty
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Who will win in Stoke-on-Trent?

Labour are the favourites, but they could fall victim to a shock in the Midlands constituency.  

The resignation of Tristram Hunt as MP for Stoke-on-Central has triggered a by-election in the safe Labour seat of Stoke on Trent Central. That had Westminster speculating about the possibility of a victory for Ukip, which only intensified once Paul Nuttall, the party’s leader, was installed as the candidate.

If Nuttall’s message that the Labour Party has lost touch with its small-town and post-industrial heartlands is going to pay dividends at the ballot box, there can hardly be a better set of circumstances than this: the sitting MP has quit to take up a well-paid job in London, and although  the overwhelming majority of Labour MPs voted to block Brexit, the well-advertised divisions in that party over the vote should help Ukip.

But Labour started with a solid lead – it is always more useful to talk about percentages, not raw vote totals – of 16 points in 2015, with the two parties of the right effectively tied in second and third place. Just 33 votes separated Ukip in second from the third-placed Conservatives.

There was a possible – but narrow – path to victory for Ukip that involved swallowing up the Conservative vote, while Labour shed votes in three directions: to the Liberal Democrats, to Ukip, and to abstention.

But as I wrote at the start of the contest, Ukip were, in my view, overwritten in their chances of winning the seat. We talk a lot about Labour’s problem appealing to “aspirational” voters in Westminster, but less covered, and equally important, is Ukip’s aspiration problem.

For some people, a vote for Ukip is effectively a declaration that you live in a dump. You can have an interesting debate about whether it was particularly sympathetic of Ken Clarke to brand that party’s voters as “elderly male people who have had disappointing lives”, but that view is not just confined to pro-European Conservatives. A great number of people, in Stoke and elsewhere, who are sympathetic to Ukip’s positions on immigration, international development and the European Union also think that voting Ukip is for losers.

That always made making inroads into the Conservative vote harder than it looks. At the risk of looking very, very foolish in six days time, I found it difficult to imagine why Tory voters in Hanley would take the risk of voting Ukip. As I wrote when Nuttall announced his candidacy, the Conservatives were, in my view, a bigger threat to Labour than Ukip.

Under Theresa May, almost every move the party has made has been designed around making inroads into the Ukip vote and that part of the Labour vote that is sympathetic to Ukip. If the polls are to be believed, she’s succeeding nationally, though even on current polling, the Conservatives wouldn’t have enough to take Stoke on Trent Central.

Now Theresa May has made a visit to the constituency. Well, seeing as the government has a comfortable majority in the House of Commons, it’s not as if the Prime Minister needs to find time to visit the seat, particularly when there is another, easier battle down the road in the shape of the West Midlands mayoral election.

But one thing is certain: the Conservatives wouldn’t be sending May down if they thought that they were going to do worse than they did in 2015.

Parties can be wrong of course. The Conservatives knew that they had found a vulnerable spot in the last election as far as a Labour deal with the SNP was concerned. They thought that vulnerable spot was worth 15 to 20 seats. They gained 27 from the Liberal Democrats and a further eight from Labour.  Labour knew they would underperform public expectations and thought they’d end up with around 260 to 280 seats. They ended up with 232.

Nevertheless, Theresa May wouldn’t be coming down to Stoke if CCHQ thought that four days later, her party was going to finish fourth. And if the Conservatives don’t collapse, anyone betting on Ukip is liable to lose their shirt. 

Stephen Bush is special correspondent at the New Statesman. His daily briefing, Morning Call, provides a quick and essential guide to British politics.