Italy Accuses Wealthy North European States of Blackmail

Mish

EU leaders struggled for three days come up with a Covid package. Talks near a breakdown.

Mission Impossible?

When it comes to the EU, I am skeptical of headlines like this: EU leaders struggle with 'mission impossible' at deadlocked recovery summit.

The leaders are at odds over how to carve up a vast recovery fund designed to help haul Europe out of its deepest recession since World War Two, and what strings to attach for countries it would benefit.

Diplomats said the leaders may abandon the summit and try again for an agreement next month, but as they negotiated into the early hours of Monday a deal still looked possible.

Dutch Prime Minister Mark Rutte’s position reflects political realities in his country, where voters resent that the Netherlands is, proportionately, among the largest net contributors to the EU budget.

He and his conservative VVD party face a strong challenge from far-right eurosceptic parties in elections next March.

An attempt to reach a compromise failed on Sunday. A deal envisaging 400 billion euros in grants - down from a proposed 500 billion euros - was rejected by the north, which said it saw 350 billion euros as the maximum.

Italian Prime Minister Giuseppe Conte accused the Netherlands and its allies — Austria, Sweden, Denmark and Finland — of “blackmail”.

The Issue 

Italy wants free money, the bulk of which would come from the wealthier nations.

The Problem with Deals

The EU is known for last minute deals. In fact, there is seldom if ever a deal except at the last moment. 

This happens because all 27 nations have to agree to make changes of any substance.

What Different Time? 

  1. Lagarde's Unusual Opinion
  2. Brexit 
  3. More than the Usual Splintering

Lagarde's Unusual Opinion

European Central Bank (ECB) President Christine Lagarde said it would be better for the leaders to agree an “ambitious” aid package than to have a quick deal at any cost.

Lagarde’s comments suggested she was relaxed about the possibility of an adverse reaction on financial markets if the summit fails, especially as the ECB has a 1 trillion euro-plus war chest to buy up government debt.

The EU never agrees to a "quick deal". Bickering over this summit has been going on for months. The summit was supposed to finalize it.

However, the fact that the ECB would rather wait for something that may never happen increases the likelihood of no deal.

The idea that a 1 trillion euro bond buying effort will fix anything is of course ludicrous. But it does provide a relief valve that the EU is still OK.

Brexit

Brexit is a minor concern here and not really related except psychologically. 

The world did not end when "no deal" was the result of two years of negotiations. 

More Than the Usual Splintering

Even as Germany and France drift together in ways, Italy has drifter further apart from overall EU goals. So have Poland  Hungary. Austria, Sweden, Denmark and Finland over various issues. 

In this case is it is the haves vs the have nots, but there are different splits over things like immigration and working out a Brexit WTO deal with the UK.

It is harder and harder to get all 27 nations to agree even though Chancellor Merkel, on her way out the door is more wilkling than usual to make a compromise. 

No Surprises Either Way

I will not be surprised by a deal, but it will not be the deal Lagarde hopes for. 

Instead, assuming there is a deal, it will be based on smoke, mirrors, and promises that morph into outright lies.

For how the EU operates on smoke and lies, please see my report on how the EU's Climate Change Effort is Comically Exaggerated.

Mish

Comments (49)
No. 1-12
Casual_Observer
Casual_Observer

Wasnt Italy the country that hid all its debt prior to joining the EU and then showed the ECB the real books after they were admitted ?

Anda
Anda

There is not a great deal of press on this in Europe where I am reading, like it is an ongoing negotiation that gets updated occasionally. For some reason it is kept quite low key, in fact the whole state of the economy is just sort of pending for now. In reality several countries are going to have to rocket their deficits if they hope to balance out the drop in gdp, and this would be over several years. The ecb might not place conditions, but spreads rise whenever there is opposition and in this case maybe the german constitutional court challenge to the ecb will be played ? It will look a bit odd for the "prudent" countries if after no deal the rest just go and load up at the ecb anyway. All I make out for now is that all sides are more concerned about what strings are attached, whether mutualisation or fiscal oversight.

anoop
anoop

They make some fine cars there.

caradoc-again
caradoc-again

The final bill will need to be much higher. > €1Trn and out of northern countries.
Its depression level and not finished yet.
They will sheer the Dutch, Germans et and muddle through.

The sheep are kept in the dark and bullshit piled on top and wont realise until they hear the clippers.

Mushroom Sheep.

caradoc-again
caradoc-again

Macron is accusing the Dutch of acting like Brexit Britian.
That's the pinnacle of the insult he can use.

France needs a bail-out. A massive bail-out and he knows it. He needs a tit to suck as soon as possible.

Italy comes out as the poor relation but really, by importance of economy to the EU, France is it and Merkel will throw Italy under a bus but can't afford to do that to France.

Its all for France.

Good luck to the frugal 4.

JanNL
JanNL

Who is blackmailing whom?

Tony Bennett
Tony Bennett

"The EU never agrees to a "quick deal". Bickering over this summit has been going on for months."

...

Well, the US and North Vietnam retired that trophy:

"As these preliminary discussions about who would meet came to a conclusion, they were then followed with additional talks about how a meeting might be held. These discussions, which began in November 1968, were centred on questions about the shape of the conference table, how many tables there should be, and how they would be placed. These discussions became known as the ‘battle of the tables’ and would last ten weeks until mid-January 1969 as fighting continued to rage and Richard Nixon won the presidential election. From the start, it was recognized that a triangular table (with the North Vietnamese/NLF combined but the US and South Vietnamese separate) would be a non-starter as it would imply that the Communist side was outnumbered two-to-one. North Vietnam wanted a square table in order to provide further legitimacy to the NLF, and also suggested four tables arranged in either a circular or a diamond pattern. The American preference was for a two-sided table or two rectangular tables. The North Vietnamese countered by suggesting a round table. Whereas the Americans supported the idea of a round table on the basis that people sitting at the table wouldn’t have any position, Saigon then protested that a round table meant that everyone was equal which would imply that the NLF delegation were equal to the South Vietnamese government."

MUCH more

https://defenceindepth.co/2017/05/19/stuck-in-endless-preliminaries-vietnam-and-the-battle-of-the-paris-peace-table-november-1968-january-1969/#:~:text=The%20deadlock%20was%20finally%20broken%20by%20a%20Soviet,more%20and%20no%20less%20than%204.5%20centimetres%20away%29.

PecuniaNonOlet
PecuniaNonOlet

From Roman Empire to bickering for handouts...observers should be aware of what happens when empires they fall. The 2000 year fall has been hard.

Webej
Webej

The sums need to be much bigger to do something about the Corona slump, but debt mutualization and Eurobonds are folly without fiscal integration. The nations cannot decide on fiscal expansion on their own because of the Euro rules (max 3% of GDP deficit and 60% debt), which can only be relaxed temporarily. But countries are unwilling to share the debt if they have no say over tax revenues and government spending.
In Northern Europe they want the ability to make people in the south actually pay the taxes they owe, move the pension age beyond 65 (let alone 50 or 55), and change how the labor market functions. Nobody here wants to work till they're 68 to help pay for Greek or Italian women getting pensions at 50 and all sorts of entrenched labor rights without performance obligations.

ToInfinityandBeyond
ToInfinityandBeyond

EU is good in concept but deeply flawed in execution. I doubt we will ever see individual national interests put aside for the good of the EU.

Augustthegreat
Augustthegreat

EU is an aggregate of nations with very different state of development, very different interests, and cultures. in order to possibly succeed, they must all agree for a political and economical union, a unified fiscal policy, and a shared sovereignty. otherwise it's just chacun pour soi, where everybody just wants to get something From the union, nobody wants to contribute to it.

Maximus_Minimus
Maximus_Minimus

It has to be a grants or nothing. Why accept conditions when every EU sovereign can borrow at almost zero. The real losers are the savers, and those who attempt to create wealth the old fashion way.


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