Dispute over German aid packages
The “double boom” also holds good things for Italy
By Andrea Affaticati, Milan
08.10.2022, 11:50 a.m
In the rest of Europe there is some excitement about the German aid packages against the energy crisis. From an Italian point of view, however, the German solo efforts also have their good side. What is more dangerous is the view of the parties that will shortly govern the country.
Germany’s €200 billion “double boom” has not been well received in Italy. Even Prime Minister Mario Draghi, who is otherwise balanced in his statements, was irritated and warned: “In view of the challenge we are facing [Europäer] standing together, it is wrong to go our separate ways because of our different budgetary leeway.” The EU must act in a united, determined and solidary manner, just as it did when supporting Ukraine.
In fact, the actions of the federal government do not seem to fit in with the rejection of a German “Sonderweg” that Chancellor Olaf Scholz repeats at every opportunity. Draghi, for example, has been calling for a European price cap for gas for months. At the end of September, 15 countries, including France, wrote a letter to the President of the European Commission, Ursula von der Leyen, in which they called for such a price cap. But at the informal meeting of EU heads of state and government in Prague, the prospects of enforcing the price cap seemed to be off the table for good.
If Germany defends its interests, Italy can do the same…
But back to the double boom. There were irritated reactions in Italy in all parties. Of course, also in those of the right-centre alliance, which will soon form the new government and Germany was never particularly well disposed. However, they also see the German relief packages as an opportunity to use them to their advantage.
Giorgia Meloni, the likely next head of government and leader of the right-wing party Fratelli d’Italia, said: “When we pointed out that every state first defends its interests and that we will therefore primarily defend Italy’s interests in the EU, we became criticized.” However, Germany has provided solid evidence that this attitude is very well justified. The national-populist Lega boss Matteo Salvini also sees his demand confirmed: “If Germany puts 200 billion euros on the table, Italy will also have to take on new debts.” A demand that Meloni does not (yet) share, because that would fuel speculation on the gas market even more, she says. Conclusion: Germany is also causing trouble in the Italian right-wing alliance.
Many political scientists were also outraged. In the left-liberal daily Domani, Mario Giro describes Germany as egocentric: “Merkel would never have done that. Chancellor Olaf Scholz made a decision that could kill Europe if countermeasures are not taken immediately.” The European solidarity much touted by Scholz on August 29 at Charles University in Prague now sounds like worn-out lip service.
In relation to GDP, Italy helps more
Unlike politicians and columnists, many economic experts feel that the criticism of Germany is, at least in part, unjustified. After all, Italy’s economy, primarily northern Italy’s, is largely dependent on Germany’s: if the German economy collapses, the Italian economy will collapse too. “Of course, the communication could have been better,” says Veronica De Romanis ntv.de. But she thinks the criticism is unjustified. De Romanis is an economics expert and author – among other things, she wrote a biography of Merkel. “Haven’t all states acted like this? Of course, everyone within their means.”
De Romanis points to data from the Brussels think tank Bruegel. According to them, Italy contributed around 60 billion euros in aid money, which corresponds to 3.3 percent of gross domestic product, to cushion energy prices by the end of September. Germany in the same period 100.2 billion euros, which is 2.8 percent of German GDP. “If Italy had more leeway, the relief packages would also be higher for us,” she says.
Germany is doing nothing other than what Brussels expects: supporting the economy here and now. Of course, these short-term measures should not stop there. Common solutions must be found in the medium and long term. There is talk of an instrument similar to the EU aid fund SURE. SURE has protected jobs and workers during the pandemic. Now we need a pot from which the balance sheet weaker states can draw quickly and at affordable interest rates to support the economy and families.
“It’s good news for Italy”
Davide Tabarelli, chairman of the Italian research institute Nomisma Energia and one of the leading experts in this field, also finds the criticism of Germany exaggerated. “Of course, the war is causing great political disorder in Europe,” he tells ntv.de. “But the seriousness of the situation justifies Germany’s decision.” In addition, one must wait and see how the 200 billion euros will be used. Despite all the displeasure, some of which is justified, one should not overlook the downside of this decision, Tabarelli adds: “Unlike in the financial and economic crisis, Germany is allowing new debt. And that’s good news for Italy.”
In addition to the political disorder caused by the war in Ukraine, there is a chaotic communication that is often contradictory for the citizens and arouses resentment towards other countries. The acting Minister for the Energy Transition, Roberto Cingolani, tried to reassure the Italians by pointing out that the gas storage facilities in this country are already 90 percent full. And immediately afterwards added that Germany, with its 200 billion euros, is promoting speculation that there could be a gas shortage in winter. “It’s true, the memory is 90 percent full,” says Tabarelli. “Let’s take Italy. On some winter days we use 400 million cubic meters a day. Normally, 200 million come from the reserves and 200 million from imports, 100 of which come from Russia. But they won’t be there this winter. And that’s what it’s based on gas price.”
For Tabarelli, every country needs to get as much as possible out of the resources available at home, such as gas, coal and nuclear power plants. That doesn’t mean stopping the expansion of renewable energies. However, these could not fill the gaps at the moment. The EU must in turn signal to sellers that it is also prepared to rationalize consumption if prices continue to rise. “And in that sense, the German relief package is indeed not helpful.” Because if the state takes over part of the energy costs, the consumer is not really encouraged to pay more attention to his energy consumption. However, that would also apply to a European gas price cap.