Italian premier Matteo Renzi is central to the maneuvering for the European Commission presidency. Photo: Getty
Show Hide image

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.

Getty Images.
Show Hide image

Jeremy Corbyn's Labour conference speech shows how he's grown

The leader's confident address will have impressed even his fiercest foes. 

It is not just Jeremy Corbyn’s mandate that has been improved by his re-election. The Labour leader’s conference speech was, by some distance, the best he has delivered. He spoke with far greater confidence, clarity and energy than previously. From its self-deprecating opening onwards ("Virgin Trains assure me there are 800 empty seats") we saw a leader improved in almost every respect. 

Even Corbyn’s firecest foes will have found less to take issue with than they may have anticipated. He avoided picking a fight on Trident (unlike last year), delivered his most forceful condemnation of anti-Semitism (“an evil”) and, with the exception of the Iraq war, avoided attacks on New Labour’s record. The video which preceded his arrival, and highlighted achievements from the Blair-Brown years, was another olive branch. But deselection, which Corbyn again refused to denounce, will remain a running sore (MPs alleged that Hillsborough campaigner Sheila Coleman, who introduced Corbyn, is seeking to deselect Louise Ellman and backed the rival TUSC last May).

Corbyn is frequently charged with lacking policies. But his lengthy address contained several new ones: the removal of the cap on council borrowing (allowing an extra 60,000 houses to be built), a ban on arms sales to abusive regimes and an arts pupil premium in every primary school.

On policy, Corbyn frequently resembles Ed Miliband in his more radical moments, unrestrained by Ed Balls and other shadow cabinet members. He promised £500bn of infrastructure investment (spread over a decade with £150bn from the private sector), “a real living wage”, the renationalisation of the railways, rent controls and a ban on zero-hours contracts.

Labour’s greatest divisions are not over policy but rules, strategy and culture. Corbyn’s opponents will charge him with doing far too little to appeal to the unconverted - Conservative voters most of all. But he spoke with greater conviction than before of preparing for a general election (acknowledging that Labour faced an arithmetical “mountain”) and successfully delivered the attack lines he has often shunned.

“Even Theresa May gets it, that people want change,” he said. “That’s why she stood on the steps of Downing Street and talked about the inequalities and burning injustices in today’s Britain. She promised a country: ‘that works not for a privileged few but for every one of us’. But even if she manages to talk the talk, she can’t walk the walk. This isn’t a new government, it’s David Cameron’s government repackaged with progressive slogans but with a new harsh right-wing edge, taking the country backwards and dithering before the historic challenges of Brexit.”

After a second landslide victory, Corbyn is, for now, unassailable. Many MPs, having voted no confidence in him, will never serve on the frontbench. But an increasing number, recognising Corbyn’s immovability, speak once again of seeking to “make it work”. For all the ructions of this summer, Corbyn’s speech will have helped to persuade them that they can.

George Eaton is political editor of the New Statesman.