September 2018

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Newsletter SEPTEMBER 2018 UPCOMING EVENTS October 11, 2018: Book Presentation - Digitized labor: the Impact of the Internet on Employment by L. Pupillo, E. Noam e L. Waverman PUBLICATIONS Marcello Messori - The 2019 Budget Law: The Dangers For Italy's Role In Europe P. Canofari, G. Di Bartolomeo and M. Messori: Sovereign Debt Crisis, Fiscal Consolidation And Quantitative Easing In A Monetary Union Carlo Bastasin: The German Government's Strategy for the Euro Area In View of Italy's Instability A. Baglioni and M. Bordignon:Sovereign Debt Restructuring: Rules Versus Discretion C. Bastasin and M. Messori: A New Stalemate in the Euro Area: Italy's Risky Position Lorenzo Codogno and Mara Monti: A Stylised Narrative of Italian Banking Problems NEWS September 28, 2018 - Italy/EU: European policy needs an April 25th - Marco Piantini - Affari Internazionali -The article examines Italy’s evolution within the European Union and its overall contribution to the Europeanist world view. September 27, 2018 - The Negotiations on Public Accounts and the Price for a Banking Union - Carlo Bastasin - Il Sole 24 Ore- The Italian government’s “success” in negotiating the budget can lead to a more dangerous negotiation on the euro area reform. September 27, 2018 - Debt, Growth and Misleading Comparisons - Francesco Saraceno - Il Sole 24 Ore - Italy’s Vice Prime Minister Luigi Di Maio says that Italy should be just as daring as France and raise the level of its debt over the 1.6% mark proposed by Economy Minister Giovanni Tria. September 25, 2018 - The State Budget is Not a Theater - Massimo Bordignon - lavoce.info- The idea of deficit spending is terrible. And a conflict with Europe would have serious consequences. September 24, 2018 - Informal Meeting of Heads of State or Government, 19- 20/09/2018- EU heads of state or government gathered at the informal meeting in Salzburg to discuss internal security, migration and Brexit. September 21, 2018 - Don't Rush, Savona - Pier Carlo Padoan - Il Foglio - Italy’s former economy minister, Pier Carlo Padoan, lists the pros and cons of Italian Minister for European Affairs Paolo Savona’s proposal for reforming the European Union. September 19, 2018 - The Benefits of European Supervision - Mario Draghi's Speech at the ACPR Conference on Financial Supervision, Paris .

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Italy and Possible Implications for Eurozone Stability
ITALY IMPLICATIONS Italy and possible implications for eurozone stability After Italy’s unsuccessful push for reform at the EU Summit last month, many of its European partners may be tempted to write-off the country’s concerns. However, this somewhat complacent stance may be dangerous in that it underestimates the recent shift in Italian political dynamics that culminated in the formation of an unexpected coalition government and the extent to which this may impact financial markets and potentially EU stability. Erik Jones Abstract: Italy’s recent election surprised many are not natural political allies. While there are observers who expected a hung parliament areas of policy overlap, the diverse nature of and who were subsequently caught off guard the M5S’s political movement, its relatively by the success of the right-wing Lega and the more expensive policy agenda, and Lega’s populist Five Star Movement (M5S). This growing strength all suggest maintaining a outcome can be attributed to an increasingly united front may prove difficult. Nevertheless, volatile Italian electorate and a shift in political this unexpected political partnership ought dynamics brought about by the economic and not to be written-off by European partners. financial crisis. As the protracted coalition Finding ways to interact with Italy’s new negotiations demonstrated, the Lega and M5S government poses a considerable challenge 81 to EU leaders and, subsequently, the outlook Conte’s success with this complex agenda for EU macroeconomic governance reforms was not obvious. Moreover, there is nothing and financial markets’ stability. However, surprising in this lack of accomplishment. such efforts will be necessary to stabilize the Few heads of state or government achieve all eurozone and contain anti-EU sentiment.
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Italian Banks' Recovery Path May Be Derailed by Proposed Government Policies
NUS Risk Management Institute rmicri.org Italian banks’ recovery path may be derailed by proposed government policies by Liu Hanlei At the height of the Italian banking crisis in 2016, non-performing loans by Italian banks went up to almost 20% of total lending and EUR 138bn of debt were forced to be written down. Fast forward to 2018 Q1, a return to profit by Banca Monte dei Paschi di Siena in its latest earnings report, an Italian bank bailed out by the government last year, may signify early signs of recovery for Italian banks. In line with the better financial earnings by Monte Paschi, the median financial ratios for 11 Italian banks have seen improvement over the past 4 quarters. Non-performing loans (NPLs) ratio have been falling alongside with improving return on equity (ROE) and cost/income ratio which are some of the commonly used financial metrics to determine the performance of a bank (see Table 1). The RMI-CRI 1-year aggregate Probability of Default (PD), a median of PD for 11 Italian banks, fell with the recovery in financials of the banks since the start of 2018 until May 2018 (see Figure 1). Italian banks 2017 Q2 2017 Q3 2017 Q4 2018 Q1 Cost/income ratio (%) 70.82 67.68 69.12 63.90 Non-performing loans ratio (%) 16.96 16.25 15.40 14.40 Return on equity (%) 3.45 2.72 4.30 7.51 Table 1: Median financial ratios for 11 Italian banks. Source: Bloomberg Figure 1: RMI-CRI 1-year aggregate PD for Italian banks and European banks (median of 34 European banks excluding Italian banks).
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Governo Conte: Ecco Le Partecipazioni E Gli Incarichi Aziendali Di Premier E Ministri Di Nicoletta Cottone 8 GIU 2018
Data 08-06-2018 Pagina Foglio 1 / 2 00:00 / 00:00 ITALIA Governo Conte: ecco le partecipazioni e gli incarichi aziendali di premier e ministri di Nicoletta Cottone 8 GIU 2018 Otto dei 18 ministri e il presidente del consiglio Giuseppe Conte, hanno incarichi o partecipazioni. Lo segnala il report di OpenPolis “Governo Conte e maggioranza giall- verde”. Ecco chi sono: Alberto Bonisoli, ministro dei Beni 104061 culturali: è presidente del Cda e proprietario al 75% di Most Consult Srl, socio accomodante di Most Sas di Lucia Veleva e C e consigliere nel Cda di Nuova Accademia Srl. Giulia Codice abbonamento: Data 08-06-2018 Pagina Foglio 2 / 2 Bongiorno, ministra della Pubblica amministrazione è consigliere nel Cda di Cerved Spa e di Juventus Fc Spa. Il premier Giuseppe Conte è consigliere nel Cda di Ghms Venezia Spa e consigliere di sorveglianza di La peninsulare compagnia generale di assicurazione Spa. Il vicepremier e ministro del Lavoro e dello Sviluppo economico Luigi Di Maio è socio al 50% di Ardima srl. Il ministro della famiglia e disabilità Lorenzo Fontana è consigliere nel Cda di Cancro primo aiuto. Il ministro degli Affari esteri Enzo Moavero Milanesi è socio al 50% di Gerundo Societa ̀ a responsabilita ̀ limitata. Il vicepremier e ministro dell'Interno Matteo Salvini è vicepresidente del cda di Cancro primo aiuto. La ministra della Difesa Elisabetta Trenta è nel comitato direttivo di ConsorHum for research on intelligence and security services. Il ministro dell'Economia Giovanni Tria è consigliere nel cda della Fondazione universitaria
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Weekly Market Summary
Weekly Market Summary Weekly Market Summary October 26th, 2018 What Would It Take to Save Italy?? Super Mario or Wonderful Trump?? Fadi Nasser - Deputy Chief Investment & Treasury Officer Italy’s government continues playing with fire! In last week’s market coverage, I noted that EU Commissioners Valdis Dombrovskis and Pierre Moscovici wrote a letter to the Italian government describing Italy’s fiscal expansion plans and the size of its deviation from original numbers as “unprecedented and unacceptable”! The letter had been delivered by Moscovici, the EU’s economics chief, during a meeting in Rome - on Thursday 18th October - with Italian Finance Minister Giovanni Tria. It was meant to mark the start of a process that could potentially culminate in a decision by the Commission to issue a negative opinion (essentially rejecting Italy’s budget) and ask the Italian government to send it back with revisions (something that has never happened before and would result in millions of euros in fine!). On Friday (19th Oct.) night, rating agency Moody’s downgraded Italy’s credit rating in a widely expected move that left it one notch above junk territory. Moody’s cut Italy’s local and foreign-currency issuer ratings to Baa3 from Baa2 - citing weakening of Italy’s fiscal strength and stalled plans for economic and fiscal reforms - and changed the outlook to “stable” from “negative”. “The shift towards an expansionary fiscal policy suggests that, rather than falling over the coming years as was projected under the previous government’s fiscal stance, Italy’s public debt will instead remain around the current 130% of GDP, a level that makes Italy vulnerable to future domestic or externally-sourced shocks, in particular to weaker economic growth,” Moody’s noted in the report.
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Italian Election Monitor Five Star-League Government Steering Towards a Clash with the EU
Investment Research — General Market Conditions 28 May 2018 Italian Election Monitor Five Star-League government steering towards a clash with the EU Markets are set to focus on any indications by the new Five Star-League New Italian government team government on its policy agenda and priorities in coming days and weeks. Prime Minister: Giuseppe Conte (technocrat, We expect to see clashes between the Italian government and the EU on the law professor) economic ruleset over coming months. Economy/Finance Minister: Giovanni Tria (technocrat, economics professor) Abandonment of fiscal prudence could trigger more rating action in coming weeks. European Affairs Minister: Paolo Savona We recommend clients take a cautious stance on BTP and focus on other markets (technocrat and controversial original choice such as Spain or France, both of which have widened to Germany/swaps. We for Finance Minister) expect EUR/USD to retest the 2018 low at 1.1510 over coming weeks. Interior and Deputy Prime Minister: Matteo Salvini (League) Following days of uncertainty, the Five Star Movement and League yesterday renewed Labour/Economic Development and Deputy their coalition deal and received approval for their cabinet from President Sergio Prime Minister: Luigi Di Maio (Five Star) Mattarella. Although the initial market reaction was positive, as political uncertainty subsided Foreign Minister: Enzo Moavero Milanesi along with the risk of a new election, we think there will be more struggles ahead and believe (technocrat, ex-European Affairs minister that markets will continue to be very headline driven over the next few weeks and months. under Mario Monti) Defence Minister: Elisabetta Trenta (Five EU relations—confrontations likely Star) The new government will be a combination of technocrats and politicians (see box Source: Bloomberg above right).
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Il Presidente Del Consiglio Dei Ministri Giuseppe Conte Comunica La Composizione Del Governo
Il Presidente del Consiglio dei Ministri Giuseppe Conte comunica la composizione del Governo Palazzo del Quirinale, 31 maggio 2018 Vi leggo la composizione del Governo. Mi affiancheranno il deputato Luigi di Maio, Ministro dello sviluppo economico e del lavoro e delle politiche sociali, che assumerà anche le funzioni di vice presidente del Consiglio dei Ministri; il senatore Matteo Salvini, Ministro dell’interno, che assumerà anche le funzioni di vice Presidente del Consiglio dei Ministri. I Ministri senza portafoglio: deputato Riccardo Fraccaro, al quale sarà conferito l’incarico per i rapporti con il Parlamento e per la democrazia diretta; senatrice avvocato Giulia Bongiorno, alla quale sarà conferito l’incarico per la pubblica amministrazione; senatrice avvocato Erika Stefani, alla quale sarà conferito l’incarico per gli affari regionali e le autonomie; senatrice Barbara Lezzi, alla quale sarà conferito l’incarico per il Sud; deputato Lorenzo Fontana, al quale sarà conferito l’incarico per la famiglia e le disabilità; professor Paolo Savona, al quale sarà conferito l’incarico per gli affari europei. Poi, ancora, mi affiancheranno: il Ministro degli affari esteri e della cooperazione internazionale, professor avvocato Enzo Moavero Milanesi; Ministro della giustizia: deputato avvocato Alfonso Bonafede; Ministro della difesa: dottoressa Elisabetta Trenta; Ministro dell’economia e delle finanze sarà il professor Giovanni Tria; Ministro delle politiche agricole, alimentari e forestali sarà il senatore Gian Marco Centinaio; Ministro dell’ambiente e tutela del territorio e del mare: Generale Sergio Costa; Ministro delle infrastrutture e dei trasporti: senatore Danilo Toninelli; Ministro dell’istruzione dell’Università e della ricerca: dottor Marco Bussetti; Ministro dei beni e delle attività culturali e del turismo: dottor Alberto Bonisoli; Ministro della salute: deputata Giulia Grillo.
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Monthly Report on Italy
Luiss School of Government Monthly Report on Italy in collaboration with Luiss CISE Centro Italiano Studi Elettorali N. 5 July 2019 1 of 18 Monthly Report on Italy Italian politics has always been an arcane subject. A handful of specialists and enthusiasts love to talk of its Machiavellian intricacies for hours on end, but most people, especially north of the Alps, not only do not understand it, but see no reason why they should bother to understand it. Today there are at least three reasons why they should. First, in Italy the crisis of the political establishment that is now evident in many advanced democracies began a quarter century ago. This means that the country is further down the road of the democratic malaise – it is a laboratory and a bellwether. Second, Italy is the first country from within the historical core of the European community to be governed by anti-establishment parties. Third, its politics represent the greatest threat to the stability, or possibly even the existence, of the common European currency. Founded in 2010 in a University that has a very strong international vocation, the Luiss School of Government aims to facilitate the connection between Italy and the world outside of it. It aims to prepare the future Italian public elite for the complexities of an ever more integrated planet, and to provide first-class education to non-Italian students in Italy’s capital city. SoG professors have often helped non-Italian journalists and newspaper readers understand Italian politics. Thus, it seems only natural to me that, in light of the recent European elections, the Luiss SoG should offer a monthly report on Italy that provides an interpretation of the country’s recent political events, and makes an educated guess about what happens next.
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Global Markets
GLOBAL MARKETS Friday, September 28, 2018 Markets in brief Japanese yen fell as Asian stocks gained and quarter-end portfolio rebalancing weighed on the currency. The currency was already under pressure from easing trade concerns with the U.S. along with ongoing policy divergence. USD/JPY hit earlier today 113.64 yen, its highest since December 12 (almost 10-month high). Euro traded flat on the day but remained under pressure from Italy’s budget plan concerns. Traders will be paying attention for Eurozone inflation data at 12:00 LT. British pound was also little changed after falling 0.67% in previous session. Swiss franc was near a 1-month low of 0.9782 per dollar hit yesterday, when it tumbled more than 1%. Gold prices steadied but a strong dollar could keep it under pressure. Spot gold hit yesterday, $1181.96, a 6-week low. Oil prices continued to trade firm as investors prepare for potential supply impact from looming Iran sanctions. U.S. stocks recovered yesterday as the markets refocused on Fed’s confidence in the economy. Asian shares rose today tracking Wall Street’s optimism. Nikkei index hit its highest level since November 1991 (27-year high). Most Gulf stock markets posted marginal gains yesterday. Dubai index surged helped by a jump in its biggest bank’s shares. Italy defying the European Union Italy agreed on a 2019 deficit of 2.4% of GDP, a blow to efforts by Finance Minister Giovanni Tria and President Sergio Mattarella to moderate the more extreme instincts of the populist government.
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VANISHING ACT: the Eurogroup's Accountability
VANISHING ACT: The Eurogroup’s accountability Benjamin Braun and Marina Hübner Editor: Leo Hoffmann-Axthelm Transparency International EU is part of the global anti-corruption movement, Transparency International, which includes over 100 chapters around the world. Since 2008, Transparency International EU has functioned as a regional liaison office for the global movement and as such it works closely with the Transparency International Secretariat in Berlin, Germany. Transparency International EU leads the movement’s EU advocacy, in close cooperation with national chapters worldwide, but particularly with the 24 national chapters in EU Member States. Transparency International EU’s mission is to prevent corruption and promote integrity, transparency and accountability in EU institutions, policies and legislation. www.transparency.eu Title: VANISHING ACT: the Eurogroup’s accountability Authors: Benjamin Braun and Marina Hübner, Max Planck Institute for the Study of Societies, Cologne Editor: Leo Hoffmann-Axthelm, Transparency International EU, Brussels Cover photo: © European Union / beëlzepub Page 39: © aesthetics of crisis Page 6: © European Union Page 41: © The Council of the European Union Page 11: © The Council of the European Union Page 43: © The Council of the European Union Page 16: © Didier Weemaels Page 45: © NASA Page 22: © European Union Page 47: © Governo Italiano Page 24: © Maryna Yazbeck Page 49: © The Council of the European Union Page 25: © aesthetics of crisis Page 52: © European Union Page 26: © The Council of the European Union Page 54: © The Council of the European Union Page 28: © Leo Hoffmann-Axthelm Page 57: © European Parliament Page 35: © Marylou Hamm Page 58: © Jordan Whitfield Page 38: © jeffowenphotos Page 61: © Alice Pasqual Design: www.beelzePub.com Every effort has been made to verify the accuracy of the information contained in this report.
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LSE European Politics and Policy (EUROPP) Blog: What Can We Expect from Italy’S New Government? Page 1 of 2
LSE European Politics and Policy (EUROPP) Blog: What can we expect from Italy’s new government? Page 1 of 2 What can we expect from Italy’s new government? The new Five Star Movement/Lega government in Italy is one of the most ideologically diverse governing coalitions in the country’s history. Mattia Guidi writes that there is great uncertainty over whether the government can keep its many promises to the Italian electorate, and even greater uncertainty over whether the two parties will be able to continue to work together despite their ideological differences. Giuseppe Conte and Sergio Mattarella on 31 May, Credit: Presidenza della Repubblica (Public Domain) The weeks leading to the formation of the new Italian cabinet looked like a soap opera: love declarations, fights, plot twists. Just one week ago, the Five Star Movement leader Luigi Di Maio went on TV threatening to initiate an impeachment procedure against President of the Republic Sergio Mattarella − let us remember that impeachment equals an accusation of “high treason” or an “attempt against the Constitution” − for his refusal to appoint an openly Eurosceptic Minister of the Economy (the 82-year-old Professor of Economics Paolo Savona). On Friday 1 June, the government formed by the Five Star Movement and Matteo Salvini’s League was sworn in. What changed in those five days? First, the awful performance of the Italian stock market and government bonds (which reached on Tuesday the highest interest rates since 2013) certainly contributed to softening the two parties’ stance. Second, President Mattarella’s intention to appoint a caretaker government would have led to a snap election in the middle of the summer.
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Dr. Jekyll and Mr. Hyde? the Approaches of the Conte Governments to the European Union
Italian Political Science, VOLUME 16 ISSUE 1 Dr. Jekyll and Mr. Hyde? The Approaches of the Conte Governments to the European Union Andrea Capati Marco Improta LUISS GUIDO CARLI UNIVERSITY, ROME Abstract Over the past few years, interdependence and the increasing importance of external constraints on Member State governments’ domestic policies have deepened relations between the European Union (EU) and European cabinets. This article investigates the Conte I and Conte II governments’ approach to the EU. Drawing on cleav- age theory, we hypothesise that the PD exercised a ‘mitigation effect’ on M5S Euroscepticism, leading to a change in the government’s attitude towards the EU. We test this hypothesis through a small-n comparative analysis based on the two governments’ political programmes, composition, and budgetary policy in the frame- work of the European Semester. The article is structured as follows: First, we build the theoretical framework on cleavage theory and the ‘mitigation effect’ hypothesis. Second, we illustrate the transition from the Conte I to the Conte II government. Third, we discuss the method and research strategy. Finally, we examine the Conte gov- ernments’ political programmes, composition and budgetary policy with a view to testing the ‘mitigation effect’. Our analysis shows that a shift in Italy’s orientation towards the EU occurred in the transition from Conte I to Conte II, owing much to the PD’s involvement in the latter. 1. Introduction n the XVIII parliamentary term, Italy has already had three governments. Two of them were headed by Giuseppe Conte, a nonpartisan figure who previously worked as I a lawyer and academic.
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Salvini's Italy Between Greek Tragedy and Portuguese Fado
Expert Comment 48/2018 19 October 2018 Salvini’s Italy between Greek tragedy and Portuguese fado Miguel Otero-Iglesias | Senior Analyst, Elcano Royal Institute | @miotei The original version in Spanish was published by Agenda Pública. Italy is the chronicle of a conflict foretold. It was evident the government of Giuseppe Conte –directed by his political patrons, Luigi Di Maio (of the Five Star Movement) and Matteo Salvini (leader of the Lega and, for many, Europe’s strongest because most feared politician)– would clash with the European Commission over the deficit levels of the new Italian public budget. Di Maio and Salvini convinced (or more likely compelled) their Minister of Finance, Giovanni Tria, to allow the deficit for 2016 to rise from a planned 1.6% of GDP to 2.4%, which was received in Brussels like a slap in the face. In response, the Commission’s President, Jean-Claude Juncker, was very firm: Italy cannot receive favoured treatment, for ‘if everyone received it, that would be the end of the euro’. I have just returned from a few days in Italy, where the tension was plain to see. I had the opportunity to attend a meeting of young US and Italian leaders from a variety of sectors, organised by the Italy-US Council. The level of concern amongst the Italian contingent was more than noticeable. Many feared that Salvini would over-estimate his own strength in his battle with Brussels and push the country into an even more acute crisis. The ghost of the Greek tragedy of 2015 was in the air.
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