Last week I wrote about the situation in Italy. I wrote that I believe we have strong grounds to be worried about the situation in Italy because of a worsening public debt, slow growth and, as yet, a fragile banking sector. Maybe the lack of clarity in Italy can be best exemplified by the data of a recent Eurobarometer survey and published on Wednesday.
This data shows that a minority of Italians support Italy’s membership of the European Union and a strong majority support Italy’s membership of the eurozone. We need to keep in mind that a country cannot be a member of the eurozone unless it is also a member of the European Union.
Yesterday we also had the first day of the European Council meeting, which includes the heads of government of the member states. It continues today. The agreement with the United Kingdom on withdrawal from the EU is likely to feature prominently at this meeting. However, the position taken by the Italian government on its own public sector deficit is also likely to come up during discussions, as will the future of the EU.
With the European Parliament elections next May, there may well be a change in the current equilibrium of European politics. The two leading parties are the European Popular Party and the Progressive Alliance of Socialists and Democrats. At a member state level, the so-called populist parties have been gaining support and the question that needs to be asked is whether these populist parties (which may not necessarily belong to one cohesive political grouping), will gain enough votes next May to upset the two traditional parties.
Today Malta is probably the least Eurosceptic country of all the member states
Given that the European Parliament elects the President of the European Commission and approves (or rejects) the appointment of the European Commission as a whole, and given that the members of the European Commission are nominated by the European Council which reflects the political situation in each of the member states, a win for the populist parties in the European Parliament elections is more than likely to signal a change in economic policies of the European Union.
As such, those populist parties that are in government in their country are taking two strategic decisions. The first is to push for more flexibility in their fiscal policy. For this one needs to read, “have a larger public sector deficit”. The second is to play a cat and mouse game till May, in the hope that there will be a change in the current equilibrium of European politics.
All this may sound like partisan politics at a European level. In effect it is not. The results of the European Parliament elections may eventually lead to an end to the policy of achieving a balanced budget in EU member states, to the loosening of fiscal policy and to increases in public expenditure across the whole of the EU.
If this were to happen, it would be a complete reversal of the economic policies we have had for the last years. It will have an impact on the economic policies of member states and eventually on the economic relations between the EU and the other leading economies of the world, such as the US and China.
Malta cannot afford to sit on the fence in all this. Our strong economic performance needs to be safeguarded against any attempt in EU institutions to weaken our position internationally.
I write internationally because our economy is heavily dependent on foreign direct investment in most sectors.
Today Malta is probably the least Eurosceptic country of all the member states. It is the country with the highest percentage of respondents (93 per cent) who believe that on balance the country has benefitted from being a member of the EU. It needs to remain that way for the benefit of the common good of Malta.
By this time next year we may have a European Union that is different to the one we have to day. Not so much in its structures, but more in its policies. In the short-term this may seem as something positive. I have my strong doubts as to whether it will still be positive in the medium and long term. This is why European politics needs to start being of interest to us – it is going to affect our economy.