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News & Insights on Europe

News and Views on Europe – 16 Aug 2019

posted by eucentresg

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Italian coalition government breaks down and call for snap elections by Salvini spooked Italian market
Last Thursday (8 Aug), Italian Deputy Prime Minister (PM) and Interior Minister Matteo Salvini announced the collapse of the coalition government between his League party and the Five-Star Movement (M5S). He also called for new elections to take place in October.

The coalition government made up of two ideologically different parties was marked by tensions, which came to a head over a proposal for funding a multi-billion euro high-speed train line between Lyon and Turin. M5S had opposed the project, citing environmental and monetary costs. Italian PM Guiseppe Conte said Salvini “must explain to Italians why he wants to bring down the coalition government”.

Salvini’s League party subsequently tabled a vote of no-confidence against Conte, in a bid to trigger snap elections and possibly take advantage of favourable opinion polls, which suggest the League could make sweeping gains, to become Italy’s new leader. However, his plan is not without challenge. Reports carried by EU Observer, EURACTIV and POLITICO suggest M5S and center-left Democratic Party (PD), led by former PM Matteo Renzi, may form an unlikely alliance to stall Salvini’s bid for early elections. Renzi has called for the installation of a caretaker government, with the “support of parties across the political spectrum”.

The news “triggered a 25bp surge in the cost of Italy’s 10-year bonds to 1.776% … the biggest one-day jump since the coalition government was formed in May 2018”. The Milan stock exchange dropped 2.48% last Friday.

On Monday (12 Aug), the Italian Senate was recalled to vote on a timetable that involved the no-confidence vote. They decided to hold a confidence vote on Conte next Tuesday (20 Aug). Renzi has agreed to a transitional government with the M5S party. However, Salvini clarified his ministers would not immediately resign, a reversal from earlier threats.

In another surprise reversal, Salvini also agreed with M5S that elections should not take place till a law was passed to reduce the number of parliamentary seats by 345 – a move that would likely keep the government in place for longer given the complex process that follows. A senior League official suggested that Salvini previously “miscalculated” and was trying to “fix it with this move”.

According to POLITICO, even if a vote of no-confidence is passed, it would be up to President Sergio Mattarella to determine if snap elections are to take place or if a “caretaker government based on an alternative majority in parliament” is to be installed. While Renzi was supportive of a M5S-PD alliance, PD party leader Nicola Zingaretti had previously refused such an arrangement.

 

US promised to help cushion no-deal Brexit and “fast track” US-UK trade deal in return for UK support against Iran
During his visit to Mexico, UK Foreign Secretary Dominic Raab urged the EU to amend the terms of the withdrawal agreement, stating that they would be responsible for a UK departure on “no-deal terms” if they fail to compromise. The EU has steadfastly refused to renegotiate the withdrawal agreement, which was drawn up by the previous British administration. Raab reiterated the current administration’s desire to remove the Irish backstop and was firm that the UK would leave by the 31 Oct deadline.

Separately, outgoing European Commission President Jean-Claude Juncker said in an interview that “If it comes to a hard Brexit, that is in no one’s interest, but the British would be the big losers. They are acting as though that were not the case but it is”. He emphasised the EU’s stance not to re-open negotiations on the withdrawal agreement and indicated the bloc was “well prepared” for a no-deal outcome.

Meanwhile, the US has thrown its support behind Brexit, with a senior White House official stating on Monday (12 Aug) that Trump “wants to see a successful British exit from the European Union“. During his visit to London, National Security Adviser John Bolton also said the US would “enthusiastically” support a no-deal Brexit and that the US would consider sector-specific trade deals in the lead up to a “comprehensive trade agreement covering all trading goods and services”. In return, the US wants the UK to abandon the EU-backed nuclear arms control deal on Iran and joined the US-led maritime security operation in the Gulf.

However, trade analysts argued that the sector-specific deals indicated by Bolton were not realistic, especially if it neglected the US agricultural sector. According to Sam Lowe from the Centre for European Reform, “Why would Congress sign off on anything that doesn’t have agriculture included?”

Separately, US House of Representatives speaker Nancy Pelosi stated that Congress would not pass any US-UK trade deal if it jeopardised the Good Friday peace agreement in Ireland. Pelosi also added “The peace of the Good Friday Agreement is treasured by the American people and will be fiercely defended on a bicameral and bipartisan basis in the United States Congress.”

On Tuesday (13 Aug), UK PM Boris Johnson was quoted telling the press that negotiating a transatlantic deal would be “a tough old haggle, but (they’ll) get there”. Johnson emphasised that the priority would be to strike a deal with the EU. Domestically, there is an ongoing debate in the UK over the possibility of Johnson suspending parliament in order to push a no-deal Brexit. If Johnson were to decide to prorogue parliament – in which no bill or motion can be tabled, debated or voted on – those in parliament opposed to a no-deal Brexit would be “powerless to stop it”. A group of MPs have launched a legal challenge to prevent such a scenario.

 

Trump accuses Macron of sending ‘mixed signals’ to Iran
President Donald Trump accused French President Emmanuel Macron of sending “mixed signals” to Iran amid heightening tensions between the US and Iran. In a series of tweets, Trump took aim at Macron for allegedly “purporting to represent us”, stating that “nobody speaks for the United States but the United States itself”.

The comments came after an earlier report that Macron had invited Iran President Hassan Rouhani to the G7 summit to speak to Trump – a claim denied by French officials. European leaders have sought to revive the Iran nuclear deal following the withdrawal of the US.

French Foreign Minister Jean-Yves Le Drian refuted Trump’s tweets, stating that France “requires no authorisation” in their efforts to ease diplomatic tensions with Iran. A high-level French diplomat also took a jab at Trump’s “style of diplomacy”, stating that France did not “do diplomacy on Twitter, we are discussing a serious crisis”.

Separately, national security adviser to Trump, John Bolton, arrived in London to urge UK to take a tougher stance on Iran and Chinese firm Huawei. While the UK has supported the EU’s attempts to revive the nuclear deal, it is worth noting they joined the US in a maritime security mission in the Gulf, following the seizure of a British-flagged tanker in the Strait of Hormuz.

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