Reuters blog archive
By Neil Unmack
The author is a Reuters Breakingviews columnist. The opinions expressed are his own.
The minus sign in front of Italy’s latest GDP number was a reminder that Europe’s fourth-biggest economy remains stuck in a perma-recession. GDP has hardly increased in the last 15 years, and the 0.2 percent decline in the second quarter was the 11th fall in the last 12 periods. Matteo Renzi, the new prime minister, has offered only political changes. For the economy, much more is needed.
Renzi’s political focus since seizing power in February does make economic sense. The inefficient political system is a major drag for businesses. A reformed senate and electoral law could eventually help.
For now, though, the prime minister’s modest economic reforms have been ineffective. Hopes that small income tax cuts would trigger a “growth shock” have proved in vain - because Italians feared the government couldn’t afford it. Instead, Renzi faces a non-growth fiscal challenge. He may have to cut further to keep the deficit within the euro zone-mandated limit of 3 percent of GDP. Having delayed structural reforms, Renzi may not get much fiscal leeway from Brussels.
A day before the European Central Bank’s monthly policy meeting, ECB President Mario Draghi will travel to Luxembourg for talks with incoming European Commission president Jean-Claude Juncker. Oh to be a fly on the wall.
Some in the ECB are concerned that ultra-low sovereign borrowing costs and Draghi’s “whatever it takes” promise has relieved pressure on euro zone governments to carry on with structural economic reforms.
Juncker has signalled he is comfortable with a Franco-Italian drive to focus on growth and job creation rather than cutting debt.
European Commission president-elect Jean-Claude Juncker will hold talks with the various political groupings in the European Parliament as he seeks to develop policy positions. Most interesting would be indications about which way he is bending in the growth versus austerity debate.
Italy’s Matteo Renzi, resurgent after a strong performance in May’s EU elections, is pressing for a focus on measures to get the euro zone economy firing and has even managed to get Germany to talk the talk. But any leeway will be within the existing debt rules, not by writing new ones.
from Hugo Dixon:
By Hugo Dixon
Hugo Dixon is Editor-at-Large, Reuters News. The opinions expressed are his own.
Matteo Renzi is on a roll. The Italian prime minister is a brilliant politician. His youthful dynamism has bought him time with his people, the markets and the European Union to carry out the immense job of reforming Italy. But he has yet to show he can execute. He now needs to, because even his time will run out.
from Anatole Kaletsky:
Matteo Renzi, the prime minister of Italy who took the revolving presidency of the European Union this week, seems to be the sort of man that Napoleon was referring to when he reputedly said that the key qualification he sought in recruiting a general was good luck.
Renzi become prime minister without even needing to win an election because Silvio Berlusconi and all other rivals self-destructed. He took power just after Italy passed the lowest ebb of its economic fortunes. In May, he was rewarded for his good fortune by Italy’s voters, who anointed him with a strong democratic mandate in the same European elections that discredited almost all Europe’s other national leaders. Now he is taking the helm in Europe, as an economic recovery is starting and the European Central Bank is swinging decisively in support of growth.
Italian Prime Minister Matteo Renzi will spell out to the European Parliament his priorities for Italy’s six-month tenure of the EU presidency.
Emboldened by a strong showing in May’s EU elections, Renzi is pressing for a focus on growth rather than austerity and has even managed to get Germany to talk the talk.
At an EU summit last week, leaders accepted the need to allow member states extra time to consolidate their budgets as long as they pressed ahead with economic reforms. They pledged to make "best use" of the flexibility built into the bloc's fiscal rule book – not, you will notice, countenancing any change in the rules.
The ripples of EU election results are being felt, no more so than in France where the National Front topped the poll.
The day after the results, Prime Minister Manuel Valls promised further tax cuts for French households. The government is already committed to a 30 billion euros cut in labour taxes to help business but insists all this can be done while meeting its EU deficit commitments.
EU leaders didn’t get far last night in addressing the voter backlash dealt to them in European elections but it seems less likely that Luxembourg’s Jean-Claude Juncker will end up with Brussels’ top job, a first indication that things are on the move.
Britain’s David Cameron has been determined to block the arch federalist from becoming European Commission president and, after the strong showing by far-right and far-left parties, others also seem to see the need for a newer broom, possibly even Angela Merkel.
EU heads of government and state dine in Brussels this evening to discuss their response to a big slap in the face from the bloc’s electorates.
Italy’s Matteo Renzi, who bucked the trend by winning handsomely as an incumbent prime minister, has the wind in his sails and has pledged to change Europe’s focus towards growth and job creation after years of fiscal austerity in response to the euro zone’s debt crisis.
Pro-Moscow protesters in eastern Ukraine took up arms in one city and declared a separatist republic in another yesterday and the new build-up of tensions continues this morning.
The Kiev government has launched what it calls “anti-terrorist” operations in the eastern city of Kharkiv and arrested about 70 separatists. Moscow has responded by demanding Kiev stop massing military forces in the south-east of the country.