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Isolated Italy excluded from EU top jobs race, faces pressure over debt

Isolated Italy excluded from EU top jobs race, faces pressure over debt
FILE PHOTO: Italy's Deputy Prime Minister Matteo Salvini gestures as he speaks, during a major rally of European nationalist and far-right parties ahead of EU parliamentary elections in Milan, Italy May 18, 2019. REUTERS/Alessandro Garofalo/File Photo -
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Alessandro Garofalo(Reuters)
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By Francesco Guarascio

BRUSSELS (Reuters) – Italy risks a rude awakening in the race for top European Union jobs as it faces growing isolation after eurosceptic nationalists in its ruling coalition won big in last week’s European Parliament elections.

Far-right Deputy Prime Minister Matteo Salvini, emboldened by the election outcome, called on Tuesday for radical reforms of EU economic policy that would entail a relaxation of fiscal rules and a new mandate for the European Central Bank that, he said, should guarantee public debts.

But his calls faced a tough reality check at EU headquarters in Brussels where there is no appetite for loosening fiscal discipline to placate eurosceptic populists in member states.

Instead, the EU is bound to increase its pressure on Rome over its failure to comply with fiscal rules.

The executive European Commission will send a letter on Wednesday to the Italian government asking for clarifications on its expanding debt, an EU official said.

With no moves from Rome to comply with EU rules that require a reduction of large debts, Brussels is likely next week to launch a long legal battle with Italy that could lead to unprecedented financial sanctions in the long run.

Investors, however, would not wait until fines are imposed before making decisions over Italian assets, as shown by a quick fall in Italian banking stocks and a rise in Italian bond yields after news of the tougher EU stance circulated on Monday.

Undeterred by the markets’ reaction, Salvini insisted on Tuesday that Italy needed broad tax cuts, dismissing EU fiscal constraints as obsolete.

UPHILLPATH

To achieve his ambitious objectives in Brussels, however, he would need support from EU leaders, a large majority in the EU parliament and at least a top EU job to steer reforms. But he is expected to get none of them.

For a change to the ECB’s mandate, the backing of all 28 EU leaders is needed – a tough task for a eurosceptic government with few friends in Brussels, an EU official said.

The eurosceptic bloc in the European Parliament can count on no more than a quarter of its 751 seats, a goal Salvini himself set for the grouping that is still in the process of being formed – and now counts less than 60 deputies.

Italy is also virtually excluded from the race for top EU executive jobs that started on Tuesday with a summit of EU government leaders and should end in the coming weeks with the selection of the new head of the executive commission, the president of the EU leaders’ council and the chair of the ECB.

“Italy is isolated. When you shout, scream and insult, then you remain alone and results are very modest,” said Antonio Tajani, the centre-right Italian president of the EU parliament – another top job up for grabs following the election.

While EU leaders held a flurry of bilateral meetings on Tuesday to start deliberations on the bloc’s new leadership, Italian Prime Minister Giuseppe Conte was flying to Brussels. “No one-to-one meetings are planned,” one of his aides said.

After years of over-representation, filling three of the EU top six posts with Tajani, Mario Draghi at the ECB and Federica Mogherini at the EU diplomatic service, Italy – the euro zone’s third largest economy – could now be frozen out of all of them.

Far from bringing about a change in the ECB mandate, Italy risks having no representative at all in the board of the monetary policy-making body for the first time in its history after Draghi’s departure on Oct. 31.

Italy would need the backing of a large majority of euro zone finance ministers to have a new ECB board member appointed – which is unlikely unless Rome proposes a non-party technocrat, an EU official said.

(Reporting by Francesco Guarascio with additional reporting by Jan Strupczewski; Editing by Mark Heinrich)

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