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News Analysis: Italy's "end of austerity" calls may influence EU decision-making

English.news.cn   2014-02-08 05:17:46

by Alessandra Cardone

ROME, Feb. 7 (Xinhua) -- Italy reiterated its call for the end of austerity recently and may take its chance as the rotating presidency of the European Union (EU) in the second half of this year to influence EU decision-making in this regard, analysts believe.

"Austerity policy at any cost, which was the prevalent response to the eurozone crisis, no longer works," Italian President Giorgio Napolitano said on Wednesday while addressing the European Parliament in Strasbourg.

His appeal echoed a view repeatedly expressed by Italian Prime Minister Enrico Letta.

Federico Niglia, professor of International European History with LUISS University of Rome, told Xinhua, "Italy will probably keep this approach of 'constructive criticism' towards EU fiscal discipline during its six months of European presidency."

"This does not mean Italy is going to champion fiscal laxity. It only wants to push for some flexible mechanisms to be introduced, in order to enhance growth," Niglia said.

Some ideas on how to do it are already on the ground.

"It has been suggested, for example, to keep public infrastructure investments out of the figures considered when calculating the 3 percent GDP/deficit limit requested by the EU. It may be a good incentive for recovery," Niglia said.

Marco Lossani, professor of International Economy with the Catholic University of Milan, told Xinhua, "More fiscal flexibility would provide EU countries with more room for manoeuvre in their finances, allowing them to increase public spending and let deficit grow somewhat."

This would come as a relief especially for countries with the lowest growth and highest unemployment rates, since austerity seemed to have helped them in putting their finances in order but not in tackling the recession.

"It would likely boost domestic demand in Italy, contributing to gross domestic product growth," Lossani added.

Yet the path is not without risks, the economist pointed out, and such flexibility must be "well used".

"A first risk is that markets could react suspiciously and decide to increase bonds interest rates. This would do no good to countries with high public debt problems," Lossani said.

A second risk lies with the use such countries would do with an ampler room for manoeuvre over their spending.

"Italy is not the most 'virtuous' country, from this point of view, and it could spend more without implementing structural reforms and without giving real relief to its economy," Lossani added.

Nonetheless, anti-austerity camp seems to be on the rise in Italy, France, as much as in Greece, Spain, and Portugal at least. As the pressure spreads, Lossani quite agreed that Italy could use its EU presidency to influence internal debate and decision-making process.

"It is possible for Italy to bring about a change, although how much I cannot say ... Negotiations must be well set, and countries at risk would do better to allow the EU a stricter control on how the additional spending is done," the economist said.

As European Parliament elections, scheduled in May, are approaching, another visible concern is related to anti-EU feelings, which are also on the rise.

"The risk of an anti-European wave in next elections is high," professor Niglia warned. The EU may become symbol of all the problems afflicting citizens, who do not really understand what European institutions are doing to get them out of the crisis, he explained.

As such, the EU can easily become "the one to blame."

"It is just a perception, of course. The EU does much, especially what countries alone cannot do anymore," the analyst specified. Yet, some corrections to bring Europe closer to its citizens are seen as most urgent.

"Italy could play a useful role in this, by promoting the end of austerity and by bringing to the core of the EU some relevant issues now neglected, such as immigration or defence expenditure," Niglia suggested.

If it will be able to gather support on this line from big European countries, and not only from southern partners, the analysts hold, Italy's next EU presidency may well leave a mark.

Editor: yan
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