The Main Goal of the New Italian Government Should be to End Sanctions on Russia and Open Europe to China

After Italian President Sergio Mattarella dramatically refused to endorse a new coalition government formed by the leftist/populist Five Star Movement and the right wing/populist Lega Nord over the appointment of anti-Eurozone prospective Finance Minsiter Paolo Savona, a possible constitutional crisis has been avoided. In the end, coalition leader and newly appointed Prime Minister Giuseppe Conte appointed compromise candidate Giovanni Tria as Italy’s Finance Minister, thus ending the deadlock which saw the Italian President’s radical intervention to prohibit the formation of a coalition comprised of the two parties which won the greatest number of seats in both chambers of Italy’s bicameral legislature.

While the coalition still contains many individuals who are openly hostile to the Eurozone, any battles to withdraw Italy from Eurozone members will ultimately not serve the country at this time. For all the problems the Euro has caused for many of the EU’s Mediterranean nations, the Eurozone still too big to collapse and thus any battle against it would clearly be a Quixotic one for any Italian government. By contrast, the new Italian government is well placed to spearhead a movement against anti-Russian sanctions and thus far the new coalition appears to remain committed to ending such sanctions.

Far from being an ideological measure, the gradually growing tide of European politicians and business leaders opposed to sanctions on Moscow is both a matter of economic pragmatism and increasingly one of geo-economic necessity. With Donald Trump having just slapped the EU with large tariffs on steel and aluminium and with the US President threatening to ban luxury German cars from the large US market, the EU leadership is in desperate need of new markets for its goods, not least because Brussels, Berlin and Paris have been adamant that they will not give way to US demands in the early stages of a trade war.

The trade war between Washington and Brussels has been compounded by threats of sanctions against the EU if European companies persevere in their desire to maintain economic ties with Iran in the format of a post-US JCPOA (Iran nuclear deal). Taken holistically, the EU has for too long banked on a combination of self-sufficient insularity and good relations with the US, even though the efficacy of both is rapidly crumbling, at least for the time being.

Today, the EU is desperately in need of good relations with the other non-European parties to the JCPOA, namely Russia and China, in order to attempt and prop up an international agreement that the US is intent on killing via the threat of sanctions against European companies who continue to do business with Iran.

While anti-Moscow sanctions were never entirely popular in Mediterranean Europe, recent weeks have seen visits to Russian President Vladimir Putin by both German Chancellor Angela Merkel and French President Emmanuel Macron in clear attempts to at least partly de-escalate tensions between Europe and Russia.

In this sense, the always anti-sanctions mindset of the two parties which now form Italy’s governing coalition have become ever more mainstream throughout Europe. That being said, dropping unfair sanctions against Russia is only one part of the process required to help Europe gain leverage against the US in both the trade war and the related possible sanctions stand-off stemming from the EU’s desire to preserve the JCPOA. Europe must court not only Russia but also China if it is to manage to withstand the tide of a clearly anti-Brussels US President.

While it has not fully dawned on many Italian politicians, China’s wealthy domestic market – the largest in the world among any nation-state, is the perfect marketplace for luxury Italian goods ranging from designer clothes and furniture to household products, cars and even agricultural goods. The same applies to the rest of Europe where China is on its way to fully eclipsing the US as a prime foreign market for luxury European goods ranging from fine wines to Mercedes-Benz and Ferrari cars.

China has long sought to open up reciprocal trade with Europe and traditionally it has been Europe which has been the more reluctant partner in this respect. Today though, with the EU’s traditional transatlantic ally all but killing off the possibility of the deeper trading relations that many in the northern bloc of the EU sought in the form of TTIP, it has become a necessity for the EU to explore new large foreign trading partnerships, including those which many in the EU have been most reticent to explore.

Only through both dropping sanctions against Russia and dropping trade barriers against China can Europe even begin to hope to accomplish that which it seeks – a more balanced ability to leverage the US at a time when the friendly Obama yeas have given way to the protectionism and anti-JCPOA stance of Donald Trump.

The new Italian government must be prepared to promote both of these items at a domestic level and an EU level if it is to gain credibility among sceptics in Brussels, Berlin and Paris. In spite of the radical composition of the new government, Rome must be careful to pick its battles wisely or else risk failing to secure necessary support to implement much needed reforms. By far, the best way to secure credibility is by allowing Italy to be both Russia and China’s gateway into Europe. The Italian economy will grow as a result and even some unexpected quarters of the EU might ultimately be grateful for such efforts.

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