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European Union

Brussels hopes for normalcy in Italy

Three months before European elections, the last thing Europe needs is market uncertainty. And things are uncertain in Italy. EU officials are trying to hide their concern.

Thanking an Italian prime minister for good collaboration and expressing hopes to their successor that good collaboration will continue - cynics would say that's almost becoming an act of routine for European Commission President José Manuel Barroso. Italy is in political chaos - again. Since 1992, Italy has had eight prime ministers. Matteo Renzi would be number nine.

Barroso on Friday (14.02.2014) called former Prime Minister Enrico Letta personally to thank him.

"He has always shown to be a committed European, with whom it's indeed a pleasure to work," Barroso said - almost as if the resignation were standard procedure.

Stability first

Save people not banks - graffiti on wall in Italy (Photo: DW/ Antje Binder)

Italy is still firmly in the grip of the economic crisis

EU officials and Italy's neighbors have a big interest in downplaying the new Italian political crisis - not least because Italy is due to assume the rotating presidency of the European Union in the second half of 2014.

Germany hopes for a "stable" outcome in Italy after Letta's resignation, a spokesman for Chancellor Angela Merkel said on Friday. "Italy is and will be a very important partner for us in Europe and in the eurozone," Steffen Seibert said. "That is why we are relying on the leaders of all the democratic parties in Italy being able to quickly agree with one another on a stable solution."

Above all, Italy's European partners hope the current political uncertainty will not have an impact on the European economy as a whole again. Seen from Brussels, things in Italy had just seemed to be calming down again under Prime Minister Letta. Italy's economy grew in the final three months of 2013, according to official statistics published on Friday. The 0.1 percent GDP growth put an end to the worst slump Italy has experienced since the end of World War II.

But more than 12 percent of Italians still don't have a job. The situation is worse for young people, of whom some 40 percent are unemployed.

Rome-based journalist Philip Willan told DW's 'Journal' television program that promises of "radical change" by Matteo Renzi, the man many experts consider the likely candidate for prime minister, therefore greatly appeals to many Italians. "It's a country run by old people very much tied up in bureaucracy and red tape, and people are having a hard time of it."

Matteo Renzi, an Italian politician, clasps his hands together in thought. (Photo: Giorgio Perottino / Reuters)

By ousting Letta, Renzi applied the very methods he wants to get rid of, say many Italians

Italy is also not likely to benefit from the overall better economic mood in Europe expected for 2014. Since 2000, unit labor costs have risen in Italy more than in any other member state of the euro zone.

In Brussels, there's fear that the threat of il spread, the risk surcharge for Italian bonds, might return. That in turn could trigger fears of an Italian state bankruptcy. It would be a nightmare for European crisis managers if Italy asked for a financial bailout. The country is "too big to fail," but its public debts are so big - 130 percent of GDP - that a bailout would overstrain the funds in the coffers of the European Stability Mechanism.

"It's not that clear exactly how he will tackle the economic problems," said Rome-based journalist Philipp Willan of Renzi. "He wants to create an atmosphere that is friendlier towards business - cut some red tape, and let people do their own thing."

Just how 'radical'?

Matteo Renzi has claimed that Italy could negotiate a relaxation of European Union deficit limits if it shows it is serious about effective reforms to its economic and political system. But not everybody in Brussels is convinced this will work out.

"I'm not entirely sure that Renzi will be able to go to Brussels and say ‘You know what? I want you to take investment expenses out of the 3 percent deficit limit. And I will tell you which investments I will do'," said Monica Frassoni, the chairwoman of the European Green Partyin the European Parliament, in an interview with DW.

"I'm not sure that he will have the courage and the capacity to do it."

Monica Frassoni, chairwoman of the European Green Party (Photo: Mauro Scrobogna/ dpa)

Frassoni hopes for an anti "austerity first" majority in EU Parliament

Not least because Enrico Letta once had the same idea. Last November, Letta's economy minister, Fabrizio Saccomanni, failed to convince eurozone counterparts in Brussels that Italy deserved their permission to temporarily breach EU deficit targets. Previously the Commission had already rejected Italy's request.

There's not much reason to believe that Renzi would be more successful. EU member states and the European Commission have not changed their opinions. And at home, Renzi will likely govern with a similar majority to that of his predecessor - provided he does not call new elections.

Over the next three months leading up to the European elections, Italy's new prime minister might therefore instead try to change the very discourse about the EU's crisis management.

Brussels ought to be prepared for such a scenario, said EU parliamentarian Frassoni.

"I think he would be right in trying to build alliances in Europe to go beyond this faceless and inefficient austerity policy - notably with France and southern countries and even some northern ones," she said.

Pro-European, but 'arrogant'

Matteo Renzi's meteoric rise within the party is largely due to the fact he's been an outsider, analysts agree, one who can't be accused of past mistakes in Italian policymaking.

But when he enters the Brussels stage, he "ought to get good advisors", Frassoni said, because in her view it's an entirely different game to win support in Europe versus at home in Italy.

"He has to avoid being arrogant and thinking he knows everything. Otherwise European leaders will think of him as a joke. And that's certainly not what we need."

While he wouldn't comment on prospects for the new government, European Commission President José Manuel Barroso said on Friday that he had met Matteo Renzi on several occasions.

"He seems to me a very committed European with a deep interest in advancing the process of European integration - and the general position of Italy which has always remained loyal to the European project," Barroso said.

The message is clear: Brussels is already keeping a very close eye on Renzi.

DW.DE