The Italian Situation in Eleven Questions (and Answers)

Yesterday I had the opportunity to have an exchange of emails with one of Italy’s leading financial journalists.  This is part of a longer conversation we have been having over the past few years about the state of European financial markets and the role of Italy within them.  The difference this time is that he published the exchange in gli Stati Generali, which is a project created to allow journalists to share stories or rely on formats that might not otherwise find their way into traditional media outlets.  Knowing the journalist, the Italian version of our exchange is much more articulate than the English-language original I am reproducing here.  The questions are in bold; my responses are in regular text.

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Italy and Europe after the Elections

When Italy’s voters went to the polls on 4 March, roughly 32.5 percent voted for the Five Star Movement (M5S) and another 17.5 percent voted for the Lega. If we add in the 4.5 percent who voted for the Brothers of Italy, well more than half of the electorate supported openly Euroskeptical movements whose leaders have flirted with the idea of leaving the euro. ‘Europe’ did not play a prominent role in the public debate during the run-up to the elections; according to pre-election polling done by SWG – one of the major national public opinion polling firms – cutting taxes and throwing out the ‘ruling class’ were more important. But the two big winners from the contest strongly advocated policies like rolling back pension reforms (Lega) or introducing a basic minimum income (M5S) that would quickly bring Italy into conflict with the European Commission over fiscal consolidation. Moreover, any future Italian government will have to draw support from one or both of these parliamentary groups. The question is what this means for relations between Italy and Europe.

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European Macroeconomic Governance Reform: Engineering or Ethics

The German grand coalition agreement promises to breathe new life into the debate about European macroeconomic governance reform. The German Social Democratic Party (SPD) will hold the ministries for foreign affairs and finance; SPD leader Martin Schulz has made it clear that he is in favor of further integration; and the bullet-point version of the agreement includes a number of eye-catching suggestions that seem to cross over a number of previous German red lines. Although emphasis on risk-reduction (and national responsibility) remains prominent, risk-sharing, stabilization, and some kind of common backstop for banking resolution and deposit insurance seems more likely now than ever in the past. Nevertheless, I remain unconvinced. The problem is not whether the SPD rank-and-file will vote in favor of the agreement. That remains to be seen. My doubts arise from the categorical difference between engineering and ethics.

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Populism in Europe – A Government & Opposition Collection (Updated)

When we first put together our collection of scholarship on populism for free access, we hoped to help researchers connect the scholarship we have published to current elections and other major political developments.  You can read our original introduction here.  Our focus was on the upcoming calendar and on recent events.  Nevertheless, we believe the strength of scholarship lies in exploring underlying trends and long-term causal mechanisms.  We still think ‘populism’ has immense political salience.  Nevertheless, we would argue that the longer-term trends are equally deserving of our attention.

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Eurobonds as Hardy Perennial

Europe’s heads of state or government have launched a new conversation about reforming the financial structures of the European Union in order to prevent another economic and financial crisis like the one that consumed the last decade.  They have a number of ambitious proposals on the table — to complete the European Banking Union, to strengthen the European Stability Mechanism, and to enhance political accountability at the European level.  Not all of these proposals are sure to be adopted, and progress is likely to be incremental.  The goal of ensuring financial market stability is nevertheless apparent.

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Trump in Asia: From Pivot to Pirouette

Donald Trump is torn between two ambitions.  One is to challenge the conventions that have underpinned U.S. foreign policy by replacing a commitment to global leadership with a determination to put America first.  The other is to undo the legacy of Barack Obama.  Neither ambition is easy to accomplish; taken together, the two ambitions constitute an enormous task.  Sometimes they overlap.  Sometimes they point in different directions.  And sometimes they interact in a dizzying manner.  Trump’s policy toward Asia is of the dizzying sort.  Where Barack Obama pivoted to Asia from the Middle in a manner that both confirmed and defied U.S. foreign policy convention, Trump seems to twirl around Asia in an accelerating pirouette.

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The Franco-German Relationship Is Not What It Used to Be

There a strong presumption that a rejuvenated Franco-German relationship can relaunch the European project. That presumption is inaccurate. The problem is not that Emmanuel Macron has too much on his plate domestically or that Angela Merkel did not get the electoral results she (and Macron) might have wanted. The major constraint on a Franco-German relaunching of Europe is not even that the French and Germans disagree on fundamental issues related to reforming macroeconomic governance in the euro area. Rather, the reason a new partnership between France and Germany is not going to relaunch the European project is that Europe is not the same.

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