Firebrand populists of Left and Right are poised to take power in Italy, forming the first “anti-system” government in a major West European state since the Second World War.
Source: Wikimedia Commons
Leaders of the radical Five Star Movement and the anti-euro Lega party have been meeting to put the finishing touches on a coalition of outsiders, the “nightmare scenario” feared by foreign investors and EU officials in equal measure.
The unlikely allies vow a blizzard of contentious measures, threatening to cancel VAT rises, overturn key market reforms, introduce a universal “basic income” for the poor, and launch a fiscal blitz in open defiance of EU spending rules.
The formation of such a government – which could will stiffen German resistance to any form of EMU union or debt pooling. It effectively dooms the Macron plan for a eurozone budget, leaving monetary union as vulnerable as ever going into the next global downturn.
Earlier proposals included the creation of a parallel currency or “fiscal certificate”. This would be based on perpetual treasury notes to cover €70bn (£62bn) of tax rebates and funds owed to state contractors. It is a way to inject liquidity into the economy, and to reintroduce the lira by stealth.
The scheme would – if ever enacted – subvert the monetary control of the European Central Bank and destroy German political consent for the single currency. It ultimately renders the euro structure unworkable.
“It is not going to be so revolutionary from the beginning. Nobody expects us to come out of the euro on day one, but what we will have is the first free government in Italy for many long years.”