(Bloomberg Opinion) -- Ask anyone which are the two most influential countries in the EU, and the answer is always the same: France and Germany. Berlin and Paris have spearheaded all the important moves in the history of European integration, starting with the creation of the European Coal and Steel Community.
Yet because of its size and commitment to the European project, Italy has often retained a leading role in running the EU. For the past few years, it was the only country to retain two of the five presidencies of European institutions: Mario Draghi led the European Central Bank, while Antonio Tajani presided over the European Parliament. The other three top positions – head of the Commission, of the European Council and of the Eurogroup of finance ministers – went respectively to Luxembourg, Poland and Portugal.
As leaders begin to haggle over the next choices for the EU’s biggest jobs, Italy’s influence appears to be waning. Instead, Spain seems to be more prominent. Emmanuel Macron, France’s president and arguably Europe’s most important leader after the announced retirement of Germany’s Angela Merkel, kicked off his round of meetings over who will fill what post with a dinner with Pedro Sanchez, Spain’s prime minister. Giuseppe Conte, Sanchez’s Italian counterpart, set out for this week’s informal EU summit with very few people taking notice.
Italy’s downgrading may become most apparent at the ECB. The country currently holds the central bank’s two key spots: The presidency and the chairmanship of the Single Supervisory Board (which oversees the euro zone’s banks). Italy’s populist government is demanding that once Draghi steps down at the end of October, one of the six seats on the ECB’s executive board must go to an Italian – as has always been the case. But few in Brussels are ready to bet on this outcome.
The central bank’s board is made up of the president and vice-president and four others, and if Germany and France fail to get their candidates into the top job, they would expect to take two of those four remaining seats. Spain’s Luis de Guindos, a former finance minister, has already taken the ECB vice-presidency. That doesn’t leave much room for Italy in Frankfurt’s game of musical chairs.
Grabbing the best Commission jobs will be another test for Rome. The Italian government wants one of the key economic briefs, which would possibly help it bend the EU’s budgetary and state aid rules in its own favor. The trouble is that the country’s two governing populist parties will barely count in the running of the new European Parliament, which has a bearing on the selection of commissioners.
Five Star took a beating at last week’s European elections. The League triumphed domestically, winning more than a third of the votes, but it will find it difficult to turn its seats into influence. Any anti-establishment group will take its place among the European Parliament’s opposition lawmakers, while the Commission president will come from the pro-EU majority.
Meanwhile, Spain is maneuvering for a prized brief in Brussels after a good showing in the European vote. Sanchez would like Josep Borrell, his foreign minister and a former president of the European Parliament, to become the vice-president in charge of economic issues, the Financial Times has reported. Paradoxically, this may be a lot easier to achieve if the next Commission president is Manfred Weber, the German conservative opposed by Sanchez and Macron. If Weber defies his doubters and wins, Spain would have a strong claim that the Commission needs re-balancing toward the left.
Should Madrid manage to usurp Rome as the third force of euro zone politics, it would follow a decade in which Spain has outperformed Italy economically. In 2008, Spain’s gross domestic product per capita was 87% of Italy’s. It is 94% now.
True, Spain benefited from a euro zone rescue program, when it asked for help to fix it banks, while Italy was spared a bailout. But successive Madrid governments have implemented a more daring and consistent program of reforms, notably in the labor market. As a result, Spain’s economic growth has averaged more than 2.7% for each of the past five years, while Italy’s was less than 1%.
Investors have responded accordingly. Over the past two decades, the yield on Italy’s and Spain’s 10-year bonds has been very similar, with Rome at times borrowing more cheaply than Madrid. Spain’s bond yields are now nearly 200 basis points below Italy’s.
Of course, Spain has its own problems. Sanchez still needs to form a new government after he failed to win a majority in recent national elections. The turmoil in Catalonia has receded for now, but separatism remains a major threat to the country’s economy and international standing. Neither should Italy be ruled out. Europe’s leaders may choose to appease Rome, as the alternative of a full-blown confrontation with its nationalist government might be too ugly.
Yet one can’t help but wonder whether historians will look back at this period as the moment when Spain and Italy swapped places in the upper ranks of the EU. Nations rise and fall. Rome should take notice.
To contact the editor responsible for this story: James Boxell at jboxell@bloomberg.net
This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
Ferdinando Giugliano writes columns on European economics for Bloomberg Opinion. He is also an economics columnist for La Repubblica and was a member of the editorial board of the Financial Times.
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