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Commentary

This is a decisive week for Italy and the Recovery Fund

The European Council summit on Friday and Saturday will indicate whether Italy will receive a bold EU investment or a recovery fund marked by horse trades and conditions.

This is a decisive week for Italy and the Recovery Fund
Andrea ColomboROME
3 min read

Conte is in the midst of a week that will be, if not yet decisive, certainly of fundamental importance. Barring some miracle, the summit of the European Council on Friday and Saturday will not reach a final agreement on the Recovery Fund. Another extraordinary summit will be needed at the end of July or in August.

However, the event remains decisive: it will be clear whether the situation has become unblocked and it is only a matter of finalizing the details, or whether it’s still rough sailing for the negotiations and the timeframe, which is particularly crucial, is set to lengthen.

The Italian Prime Minister had two crucial meetings on his agenda: The first was Monday’s meeting with Angela Merkel and the meeting with Emmanuel Macron afterwards, as well as a key moment that he hopes will be cleared in the most low-key manner possible: the mandatory vote on the government’s resolution in Parliament, which is necessary before the summit.

With the German Chancellor and the French President, Conte discussed the three issues still to be resolved: the amount of funds available and the respective proportion of grants and loans, the timing of fund allocations and the conditions attached—which, all propaganda aside, the Italian government knows are inevitable. On the first point, despite the fact that Angela Merkel defended the initial Franco-German proposal for a fund of €500 billion, the Italian government is very optimistic, convinced that in the end there will be €750 billion on the table. [Update: Merkel was amenable to the larger fund size.]

The proposal by European Council President Michel on Friday was welcomed with great relief by Conte and Gualtieri: €500 billion in the form of subsidies and another €250 billion in loans. It is true that the European budget for the years 2021-2027, which includes rebates, i.e. discounts for some countries, including the Netherlands, has been left in suspension. Italy is against it, above all because it is trying to put the confirmation of these rebates, as well as that of the cohesion funds that benefit the countries of the East, on the scales to balance out the approval of the Recovery Fund.

Regarding the conditions, however, optimism is much more tempered. This is the main obstacle. The meeting at The Hague on Friday evening between Conte and Dutch Prime Minister Rutte, with a walk through the city center and dinner, went rather badly. So much so that the Italian prime minister, while praising the “excellent climate,” had to admit that there was no “full convergence.”

On the contrary, there are “differences,” but not insurmountable ones, concerning none other than the conditions. The Netherlands and the Northern countries want the funding allocations to be tied to well-defined reforms, precise implementation times and strict controls. The Dutch apparently did not hesitate to put the abolition of the Quota 100 pension reform on the table.

From this point of view, Michel’s mediation is no great help to the countries of the South. While the President of the European Council has sided with the Mediterranean countries on the size of the Fund, he has instead taken a step towards the Northern countries regarding the controls, proposing that they should not fall under the Commission but rather the Council itself, i.e. the heads of state and government, which would decide by qualified majority and with a sort of veto power. The end result could resemble those strict conditions once imposed by the Troika. Conte immediately put his hands out in front, stressing the risk that too many conditions and too many “bureaucratic” provisions could “slow the recovery.” The suffocating conditions called for by Rutte will not be implemented, but the field remains wide open, and that is the main risk for Italy.

The obstacle of the conditions has an immediate effect on the timeframe as well. From that point of view, Rutte agreed with the Italian prime minister and Angela Merkel on the need to hurry up the proceedings, i.e. to finalize everything during the summer. However, with a hostile Dutch parliament—to such an extent that the sovereignist leader Wilders, otherwise a friend of Salvini’s, flashed a very hostile sign that read “Not a cent to Italy”—there is a risk that negotiations on the conditions will get bogged down.

The difficult moment of the parliamentary debate around the core issue of the ESM will be addressed by the government with a resolution that will more or less explicitly formalize the decision to postpone the choice until October. There should be no major problems; however, in the situation in which the Senate finds itself, one can never be sure.


Originally published at https://ilmanifesto.it/recovery-fund-per-conte-una-settimana-decisiva/ on 2020-07-12
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