Authored by Conor Gallagher via NakedCapitalism.com,

On July 24 the European Commission announced it is putting Italy on notice for alleged “rule of law” deficiencies, which could put in jeopardy EU cohesion and recovery funds earmarked for Rome.

In theory, the warning is supposed to be about democratic standards, corruption, the independence of the judicial system and the safety of journalists. In reality, the threat to cut off some EU funds is used as a form of financial blackmail to keep bloc countries from straying from neoliberal orthodoxy and NATO priorities.

European Commission President Ursula von der Leyen made this clear when she issued her thinly veiled “tools” threat ahead of Italy’s 2022 election that brought Prime Minister Giorgia Meloni and her Brothers of Italy (FdI) party to power:

NEW – EU Commission President on the upcoming elections in Italy, where a right-wing victory is expected:

“We will see. If things go in a ‘difficult direction’ – I have spoken about Hungary and Poland – we have tools.” pic.twitter.com/PxtvpXyCua

— Disclose.tv (@disclosetv) September 23, 2022

The use of these rule and law tools for purposes other than their intended purpose is also apparent in the case of Hungary and Poland. The Commission used billions in withheld funds earlier this year to bribe Orbán into relenting on money he was holding up for Project Ukraine.

Poland’s rule of law problems with Brussels magically disappeared once loyal EU/NATO soldier Donald Tusk was elected prime minister last year — despite nearly identical issues with the media, for example, as under his predecessor.

The Meloni government is now being charged with dragging its feet on reform of strict defamation laws and, ironically from the austerity-loving EU, budget cuts to public media. In an additional irony, the Banderite-supporting Commission mentions the fact that Italy’s public broadcaster censored an anti-fascist monologue on one of its shows.As the reprimand is merely a tool for political pressure from Brussels, the particulars likely aren’t all that important.

The real question is why is the European Commission coming after Italy now?

While there might not be a clear answer, we can look at the Meloni government’s economic and foreign policy moves for clues.

Neoliberal Nation 

The Meloni government has been overseeing a wave of privatizations, including critical communications infrastructure to CIA-connected private equity, and plans for more of the state rail company Ferrovie dello Stato, Poste Italiane, Monte dei Paschi bank and energy giant Eni.

Last year, Meloni chose May Day to announce her government’s promotion of short-term worker contracts, as well as the abolition of Italy’s basic income program, which provided the unemployed with an average of 567 euros a month. Despite the program providing a mild stimulus to the economy, Meloni said its elimination will force people back to work. “Where is the slump in the economy and employment?” she asked.

She failed to mention that roughly 40 percent of Italian workers earn less than 10 euros an hour in the country where average wages have fallen 2.9 percent since 1990. Millions of Italians emigrate looking for better opportunities while Meloni backtracked on her strict immigration stance in order to bring in more workers and keep the country’s wage-suppression model on track.

The government in Rome has also been pushing through a series of “reforms” as part of deals to keep money flowing from the EU’s Covid recovery fund. This neoliberal overhaul was initiated under Meloni’s predecessor, unelected former European Central Bank (ECB) President and Goldman Sachs executive Mario Draghi, with an assist from McKinsey and includes privatizing local public services and transfering power from elected officials to bureaucrats at the Italian Competition Authority which is overseen from Brussels.

It’s common knowledge that the billions in disbursements from the EU Covid recovery fund would be put on hold if Meloni deviated from the path of Draghi. So Meloni, willingly or not, has gone along.

Italy is the largest recipient (208 billion euros) of the EU’s Covid recovery fund, but the spigot will be turned off at the end of next year. In the absence of the threat to pull that money, the Commission could be looking for other ways to maintain leverage over Meloni or any future Italian government by placing the country on the rule of law watchlist.

Any public spat with Brussels over funds always has the potential to topple the government in Rome if it leads to a “confidence crisis” in the bond markets and the ECB doesn’t step in to keep Italian borrowing costs from going through the roof.

So it’s the same old story for Italy, which has actually been a top performer in liberalizing reforms over the past decades compared with other advanced economies, and Rome has followed the EU’s reform policy rulebook much more closely than Berlin or Paris.

Yet the cure for Italy’s ills is always more wage suppression, more market-friendly reforms, more social spending cuts, and more privatization. And when that inevitably doesn’t work, the answer is always to double down. Meloni has done nothing to change this, and hasn’t shown much of any sign that she and the FdI have any problem with this arrangement.

Problems with “The Most Powerful and Successful Alliance in History?”

Meloni obviously isn’t much of a fan of having to wait around for the NATO royalty to show up to start a meeting:

Giorgia Meloni on top eye-rolling form as leaders at the @Nato summit wait for Stoltenberg and Biden to arrive for today’s first session pic.twitter.com/0lczOywwav

— Henry Foy (@HenryJFoy) July 11, 2024

But are there other signs that there’s more significance behind the eye roll? Has the Meloni-led coalition shown any signs of getting wobbly on Project Ukraine? Not really.

Some in government like Deputy Prime Minister and Minister of Infrastructure and Transport Matteo Salvini are often critical, specifically of how the economic war against Russia harms Italian interests. Italian officials were also among some of the louder voices in opposition to French President Emmanuel Macron’s dalliances with officially sending European forces into Ukraine.

But Meloni has been a major backer of Ukraine. After all the hysteria over her election back in 2022, a year and a half later, the New York Times was able to declare that Meloni solidified her credentials and “has put the European establishment at ease. She has proved to be rock-ribbed on the question of Ukraine…”

And she has made clear her coalition partners like Salvini can say whatever they want as long as their votes don’t get in the way of supporting the West’s proxy war in Ukraine.

Split on Syria?

Last week, the foreign ministers of Italy, Austria, Croatia, the Czech Republic, Cyprus, Greece, Slovenia and Slovakia said they are willing to thaw ties with Syria in a step they hope will lead to the return of Syrian refugees.

In a joint letter, the above countries are calling for the creation of an EU-Syria envoy who would be tasked with reinstalling a Syrian ambassador to Brussels and designating 10 so-called “safe zones” within Syria’s government-held regions to which Syrian migrants in Europe could be returned.

On July 26, Rome also announced its intentions to return an ambassador to Damascus after a decade-long absence during the West’s efforts to topple the government.

Washington and Brussels will not be in favor of such a move, especially considering that the European Commission just unveiled its own plan to throw a billion euros at Lebanon to host Syrian refugees there (who knows where they’ll go when Israel gets its war with Hezbollah) and the simple fact that Syria is an ally of Russia.

Syrian President Bashar al-Assad met with Putin on July 24 and likely discussed a restoration of ties with Turkiye and possibly “Russian military assistance to Syria in the context of the present Israeli rampage in the neighborhood and most specifically with a view to improving Syria’s ineffective air defenses.”

China?

Much has been made about the rule of law news coming out right as Meloni embarked on a trip to China. Could the European Commission have thrown together a rule of law case against Italy in the month since Meloni mentioned she was planning on visiting China during Italy’s hosting of the G7 in June? Sure, but Meloni’s trip was also nothing out of ordinary for a European head of state. In fact, it was very similar to German Chancellor Olaf Scholz’s visit in April.

Italy and China signed some minor agreements, and Meloni mostly pleaded for more Chinese investment and a balancing of trade during her five-day visit. She also performed the obligatory lectures on China’s “support” for Russia and Chinese “overcapacity.”

Meloni also said Italy adheres to the one-China policy and opposes “decoupling” and protectionism — although Rome did recently back the EU tariffs on Chinese electric vehicles.

The Chinese were polite and talked up the relationship, but they’re mostly always that way (as long as it’s not German FM Annalena Baerbock), still patiently prodding the EU to act in its own interests rather than those of the US. Chinese President Xi Jinping said China is willing to import more high-quality Italian products and that he hopes Italy will in return provide a fair business environment for Chinese companies investing in Italy.

Meloni had previously taken a hawkish tone against China and even torpedoed Italy’s involvement in China’s Belt and Road Initiative (BRI) last year. Her about face helps highlight the disconnect between instructions to US imperial outposts and reality — one that China hopes to take advantage of:

This is the chronic delusions that many EU leaders has about China. They think they can just decouple, cancel BRI and antagonize China without consequences and then reality hits them hard and they have to go to Beijing to kiss Xi’s ring 🤭 if they…🧵https://t.co/VCBBoDnVFL

— Miss Li (@MissQuanyi18) July 31, 2024

Indeed, on Meloni’s trip Italy and China signed a three-year action plan on Sunday to implement past agreements and experiment with new forms of cooperation, including collaboration on electric vehicles and renewable energy. Some Chinese commentators said that the plan is more like a “compensatory” deal for Italy following Rome’s withdrawal from BRI last year:

“The action plan serves to minimize the negative impact on Italy after it pulled out of BRI; signing the plan also signals Italy has vast demand for cooperation with China, as it used a alternative plan to focus on areas where there is demand from both countries,” [said] ui Hongjian, a professor with the Academy of Regional and Global Governance with Beijing Foreign Studies University.

It’s important to note that the BRI is not a membership organization like BRICS, the EU, the Eurasian Economic Union, etc. It’s more of an umbrella term for infrastructure and investment deals that foster more interconnectivity to Beijing’s and typically the partner country’s advantage. Rome and Beijing never progressed much on deals after Italy joined the BRI. Will this latest “action plan” be any different?

Some China watchers celebrated the trip as a sign that Italy and Europe are beginning to get wobbly on its hawkish China stance:

#Italian PM Giorgia Meloni signs three-year action plan to strengthen🇨🇳China-🇮🇹#Italy economic & trade ties through her China visit. @GiorgiaMeloni debunks the “de-risking” narrative.
“🇮🇹Italy is likely to play a more active role in improving🇨🇳China-#Europe relations at the🇪🇺#EU… pic.twitter.com/AacjLdG2Ww

— Shen Shiwei 沈诗伟 (@shen_shiwei) July 29, 2024

But that ignores the fact that Meloni and Italy, despite having the third-largest economy in the EU, do not have that type of clout in the bloc — as evidenced by rule of law slap down that serves as a reminder for Italy to remember its place. Could more cooperation between Rome and Beijing provide an example of the benefits of such collaboration to other EU countries? The Global Times thinks so:

Meloni’s visit will have a demonstration effect among European countries, as the trend of “decoupling with China” becomes more prevalent on the continent. Substantial cooperation between China and Italy will demonstrate the benefits of collaborating with Beijing, leading Europe to realize the advantages of such partnerships.

The problem is that wishful thinking ignores the fact that if Meloni were to lead Italy down that path, Brussels and Washington would work to quickly install a new government in Rome. Still, Beijing is betting that this current arrangement cannot last, maybe best summed up by Zhou Bo, a retired PLA colonel and current senior fellow of the Centre for International Security and Strategy at Tsinghua University, who wrote the following last year in the South China Morning Post:

The battleground won’t be in the Global South, where the US has very much lost to China, especially in Africa and Latin America. It won’t be in the Indo-Pacific either, where few countries want to take sides. It will be in Europe, where the US has most of its allies and where China is the largest trading partner.

Gradually, the transatlantic alliance will relax. Even if America’s decline is gradual, it cannot afford a global military presence. It will have to retreat from around the world, including from the Middle East and Europe, to focus on the Indo-Pacific, where the US sees China as a long-term threat. Successive US presidents, Republican and Democrat alike, have asked Europeans to take greater ownership of their security. In other words, Europe has to have strategic autonomy, even if it doesn’t want to. That Europe takes China as a partner, competitor and systemic rival at the same time says more about Europe’s confusion about China, than what China really is.

Meloni Flailing About Unable to Change the One Fact that Really Matters

Meloni’s doubling back to China after confidently bailing on the BRI last year is one of her many headscratchers. Another recent example is her recent bungling of talks in Brussels.

Meloni is the president of the European Conservatives and Reformists Party, which her FdI party belongs to. It consolidated its position as Italy’s strongest one in the EU elections, and Meloni had an opportunity to grab a top European Commission post for Italy. Instead, despite cozying up to von der Leyen over the past few years, Meloni and the FdI voted against her in her confirmation for another term.

Maybe the rule of law notice from Ursula’s Commission is simply out of spite to remind Meloni who’s really in charge. Von der Leyen is nothing if not vengeful. Recall that after a wolf killed her cherished pony Dolly, she began working to reduce wolves’ legal protection so hunters could again go after them to the point of extinction in Europe. EU diplomats describe von der Leyen’s focus on wolves as “strange,” “bizarre,” “puzzling,” and definitely “pushy.”

So if von der Leyen feels like Meloni failed a loyalty test, a rule of law slapdown wouldn’t be all that surprising. This thread gets into how Meloni badly misplayed her hand in the horse trading at the European Parliament:

Her strength in 2022 – which allowed her to scoop up the support of right wing voters – was to appear coherent and consistent, avoiding compromises. Having been in opposition since the foundation of her party, including to Draghi’s “all-in” govt, had clearly helped in this sense.

— Daniele Albertazzi (@DrAlbertazziUK) July 19, 2024

In short: she could have come across as coherently radical right. She does not, as it is apparent that she’s been negotiating until the last minute & failed to get what she wanted out of VdL, who decided she did not need her.

— Daniele Albertazzi (@DrAlbertazziUK) July 19, 2024

Politico, in an Aug. 2 piece that reads like high school gossip, details how von der Leyen was gradually inviting Meloni to the cool kids’ table only for the latter to show her ungratefulness and throw it all away. Meloni’s waywardness is depicted as not driven by any grand vision for a more sovereign Italy but simply frustration over still not having a seat at the table when von der Leyen’s centrist conservatives, the liberals of French President Emmanuel Macron and the socialists of German Chancellor Olaf Scholz were cutting deals recently in Brussels. That’s all likely true.

Regardless, the Politico piece makes clear that Meloni’s tantrum better end yesterday: 

Others stressed that the relationship is at a turning point, and Meloni will have to decide which way it will go.

“We will see which Meloni will rise from this: the hard-right one we always feared or the pragmatic one which we have gotten to know?” said one EU diplomat, who was granted anonymity to speak candidly.

Even if Meloni bends the knee again to the Commission, it likely won’t make a difference for her political future due a series of approaching problems that not even von der Leyen can help with. Meloni swallowing her pride and going hat in hand to Beijing after championing her withdrawal from the BRI is an acknowledgement of the economic trouble on the horizon for Italy, as well as much of the eurozone.

Firstly, there is no end in sight to the energy crisis in Italy.

Rome had grand plans, initiated under Draghi, to make the country into a gas hub for Europe. It has a pipeline to Algeria and rammed through expansions of LNG storage facilities over local concerns in order to try to take advantage of its Mediterraean position.

None of it is working as planned.

The Red Sea remains a no-go zone, which doesn’t look to change anytime soon. The planned increase in supplies from Algeria hasn’t worked out. This left Italy turning back to Russia for pipeline gas while it was still possible before further bans go into effect, but there are problems even there now.

So not only has Italy not become a hub, but its own supply outlook is bleak. The country has already spent well over 100 billion euros trying to weather the energy crisis, but it is going to be increasingly difficult to continue at that pace.

That’s because EU austerity enforcement is on the horizon. On July 26 Italy, France, and five other EU countries were placed in the bloc’s dreaded  excessive deficit procedure for violating sacred budget rules: a state’s debt must be no higher than 60 percent of national output, with a public deficit of no more than three percent.

Italy must now present a plan to Brussels and will have no choice but to lean heavily on extreme austerity that could well be worse than during the spending cuts of the 2011-2014 Euro Crisis — brutal budgetary tightening that leads to life expectancy drops for poorer citizens.

So even if the European Commission doesn’t torpedo Meloni’s government over perceived violations of NATO/EU dogma, the coming economic implosion will almost certainly end her time as prime minister. She doesn’t have the type of public support that can weather such a storm nor does she have a level of control over financial institutions in the country with its own currency like in Hungary with Orban, which has allowed him to withstand endless pressure campaigns from Brussels. 

***

Focusing on Meloni’s political future risks missing the forest for the trees, however. The bigger story here is that this is another reminder that EU countries are not in charge of their economies and foreign policies. That would be Brussels above them and above Brussels, Washington. Until that hierarchy changes, the only change Europeans are likely to see is continual decline.

The fact that the EU needs to rely more and more on these types of threats and financial blackmail in order to force member states to go against the interests of a majority of their citizens is not a recipe for long term success.

In the meantime, the question becomes: what’s an elected leader of an EU nation to do if they want to do what’s best for their country and stay in power? Is the best route to try to limit the damage with other parts of the world, a la Orban, in preparation to quickly pick up the pieces when the EU and NATO begin to crack apart?

As the Global Times wrote after Meloni’s trip:

In the future, as long as both countries continue to solidify the position of economic and trade relations as the cornerstone of their bilateral relations, enhance the complementarity of their economic and trade relations, explore new paths for cooperation and foster friendships through cultural exchanges, a mature and stable China-Italy relationship is certainly within reach.

Now Rome would just need to figure out a way to start repairing its once-strong relationship with Moscow.