What Will Italy’s Next Government Do? A Leak Jolts Stocks

What Will Italy’s Next Government Do? A Leak Jolts Stocks


ROME — Talks between two anti-establishment parties to form a new Italian government seemed to be regaining momentum on Wednesday, even as financial markets were spooked by leaked documents that suggested the two sides shared a desire to radically change Italy’s relationship with the European Union.

The leaders of the Five Star Movement and the anti-immigrant League party dismissed the leaked document Tuesday night as “old.”

But the draft, which was on the negotiating table as of Monday morning, was apparently not “old” enough to avoid raising jitters. On Wednesday, investors shed Italian assets, and shares trading on the Milan stock market slipped.

Current or not, the document, obtained by Huffington Post Italy, brought into focus concerns among European leaders and financial markets about what a government run by the two parties could mean for Italy and the European Union as a whole.

In a series of joint statements, the two parties tried to distance themselves from the positions in the document, but in doing so only seemed to further betray their real ambitions for what they called “a rethink” of Italy’s relationship to the European Union and the common currency of most of its members, the euro.

In a joint statement Tuesday night, they protested that the proposals in the leaked document had been “radically changed” in subsequent meetings. “For example, on the euro, the parties have already decided not to put in discussion the single currency,” it said.

But an hour and a half later, Five Star, led by Luigi Di Maio, 31, and the League, led by Matteo Salvini, 45, released another joint statement clarifying — or perhaps muddying — their position on the eurozone.

That statement said they preferred to return to the arrangement before the Maastricht Treaty of 1992, which created the framework and fiscal rules for the euro — a time when the Italian lira was the coin of the realm.

“The structure of European economic governance, based on the dominance of the market, and the respect for rules that are stringent and unfounded from a social and economic point of view, requires a rethink with our European partners,” they said. “The spirit must be to return to the pre-Maastricht setting.”

Left unaddressed was the document’s proposed request to the European Central Bank that it cancel 250 billion euros, or almost $300 billion, in Italian debt, which some analysts think violates a European Union treaty.

The document showed that they would also like to revisit Italy’s contributions to the European Union budget and protect Italian small businesses from the bloc’s free market and expanded work-hour rules.

President Sergio Mattarella, who is imbued with enormous power during the negotiation process to form a new government, has made it clear that he sees his constitutional role as protecting Italy’s participation in European treaties as well as its financial health.

The proper relationship with Europe has apparently been a sore spot between the parties, and between the parties and Mr. Mattarella, in this week’s tense negotiations.

Five Star and the League joined forces this month in response to Mr. Mattarella’s proposal to appoint a caretaker government after the inconclusive March elections. The parties, which won a majority of seats in Parliament, have said they will not support such a government.

As a result, either they form a government together or Italy will return to new election, probably in the fall.

During the campaign and in the days of negotiations, Five Star had sought to ease concerns, perhaps including those of Mr. Mattarella, about their antagonism toward the European Union.

They had argued that their proposal to hold a referendum on whether to leave the eurozone was a thing of the past, even as the party’s founder, the comedian Beppe Grillo, floated the idea again this month.

But the leaked document, the authenticity of which has not been disputed, revealed that their anti-establishment and euroskeptic heart still pulsed.

The parties had already talked about other proposals in the draft, though their inclusion in the document seemed to solidify them. The text confirms that both parties want an “immediate withdrawal” of European Union sanctions against Russia, to which both parties have grown close.

“We confirm our membership of the North Atlantic alliance, with the U.S. as a privileged ally and an opening to Russia, which should not be viewed as a threat but an economic and commercial partner,” the document reads.

As part of the immediate fallout, the spread between Italy’s and Germany’s 10-year bond yields grew.

Mr. Salvini, speaking on Facebook live, relished the angst.

“You remember the spread?” Mr. Salvini said mockingly, calling it the obsession of the “great financial powers” toying with Italy’s future. He recalled that it was bankers with concerns about “the increasing spread, the sinking markets” who forced the collapse of Silvio Berlusconi’s government in 2011.

Then he took aim at the elites in Washington, Berlin and Brussels, saying that he would ignore their concerns about the potential new Italian government and put Italians first.

“If, in the little salons where they decided our children should live precariously and with fear, they are worried,” he said, “if these little salons who massacred our future are worried, it means that we are doing something right.

Mr. Salvini also ridiculed the Italian news media, including reports that he and Mr. Di Maio would take turns as prime minister, as riddled with half-truths.

“The more they insult us, the more they threaten us and the more they blackmail us, the more they make me want to take this challenge on,” he said, adding that he and Mr. Di Maio had already agreed on a rollback of pension overhauls, fiscal reforms, the use of a flat tax and a universal basic income.

He made the case that an interior minister from his party would slam shut the door for illegal immigrants, and speed up asylum requests in camps outside Italy.

Speaking directly into the phone on a sunny field, Mr. Salvini showed a disposition remarkably sunnier than he had on Monday afternoon, when he suggested the fledgling alliance could be in peril.

“We have taken big steps forward,” he said. “It would be crazy to fall in the moment of truth.”

A version of this article appears in print on , on Page A5 of the New York edition with the headline: Stock Market Rattled by 2 Parties’ Plans to Upend Italy’s Ties to the E.U.. Order Reprints | Today’s Paper | Subscribe



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