Brexit Tests Italy’s Support For The Eu
As formal exit negotiations between Britain and the European Union are set to begin this week, affection for the EU has rebounded in most European countries except for Greece and Italy. Initial fears of a large economic fallout from Brexit have not materialized in the EU, whose economy is recovering with support from European Central Bank’s prolonged stimulus. The defeat of far-right anti-EU candidates in the Netherlands and France have proved doomsayers wrong and reenergized calls for European unity.
A sharp increase in favorable views of the EU from last year has been recorded in Germany and France (18 points each), Spain (15 points), and even in the UK (10 points), according to the latest survey by Pew Research. But these signs of optimism have not fully translated into the real life of many Italians (and Greek) who wonder whether they would be better with less or no Europe.
«Only in Greece and Italy do as many as a third of the public voice support for leaving the EU», Pew analysts say in the report. While a majority of 54% of Italians say their country should stay in the EU, around one third (35%) say they should leave, according to Pew. Italy’s “pro-exit” share is the highest among the nine countries polled. Greece, which has been bailed out in return for austerity, is second behind Italy. The strongest supporter is Germany, where 88% say they want to stay, while France is sixth (76%). The reasons for dissent in Italy are both ideological and economic.
In political terms, the right more than the left backs a vote on EU membership, Pew says. But a party’s criticism of the EU does not always reflect a desire to leave: 61% of supporters of the anti-establishment Five Star Movement have a positive view of the EU. Italy’s public opinion is certainly critical of EU’s handling of the refugee crisis. In the country, the most exposed with Greece to the migrant emergency, 54% of respondents believe their government should be taking decisions on how to handle non-EU migration. This is the highest percentage in the poll.
As for the economy, Italy is in the third year of moderate recovery but youth unemployment (34%) remains among the highest in Europe behind Greece (47.9%) and Spain (39.3%). The International Monetary Fund has recently increased its growth forecasts for Italy to 1.3% this year and to around 1% in 2018-2020, citing the government’s reform efforts and Europe’s brighter outlook. However, Italy’s real income per capita will take several years to return to pre-crisis levels, widening the gap with euro zone peers, the IMF said. Uncertainty over the outcome of Brexit is one of the major growth risks cited by the Fund.
Italy is only marginally exposed to the UK in terms of trade and financial ties. In 2015 Italian exports to the UK amounted to 1.8% of GDP, against 2.7% for France, 3.2% for Spain and 3.7% for Germany, according to the Bank of Italy. Imports amounted to 1.1% of GDP, less than for the other countries. Even if the UK post-Brexit suffered a recession and reduced imports by 10% over a three-year period, the impact on Italy’s GDP would be of up to 0.25 percentage points, according to the Bank of Italy.
UK-based banks have a limited presence in Italy and the biggest Italian banks together have six branches in London, mostly for trading and investment banking activities, the central bank said. But what happens when the UK leaves the single market remains to be seen. The big question mark is whether the EU will reach a “comprehensive” trade agreement with the UK like it did with Canada or whether WTO rules will apply with no special relation.
Brexit is also going to impact the EU’s budget. The UK contributes to the EU more than it receives (over 13 billion euros a year on average versus less than 7 billion). Italy could be forced to increase its share by a reportedly 1.3 billion euros to 19 billion. Luigi Federico Signorini, Deputy Governor of the Bank of Italy, recently said that while there’s no reason to expect any serious direct and immediate repercussions on the Italian economy and banking system, difficult Brexit negotiations, especially if global and European political uncertainty increase, could trigger market turbulence. “It is unlikely that Italy would be immune,” he said.