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July 02, 2020

How Italian politics could intrude

Our focus is very much on Italy today because Italian politics intrudes in complex ways into the EU discussions. Giuseppe Conte had a telephone conversation with Angela Merkel and came back relatively optimistic about the discussions on the recovery fund. But there are still big unresolved problems. Conte said that, unless the frugal four compromise on the recovery fund, he will not be flexible on the EU budget. Italy is a net contributor. It seems that Merkel is striving for a compromise, not on the numbers but on the link to economic reforms. Conte said that Italy is reforming, but nobody really believes this. The word reform has become widely abused in the European discourse. When we talk about linking the fund to reforms, we are talking approved programmes and troika. And we see no majority for that in Italian politics either. 

Conte wants money for bridges, a big issue in Italy, motorways and hospitals. But he has no majority in his coalition for reforms. Corriere wrote yesterday that his privileged partnership with Five Star has broken down, and that cracks are now appearing in his relationship with the PD as well. 

So, beyond the many technical complexities outlined in our main story, do not underestimate the tendency of Italian politics to intrude as well. 

The ESM is becoming the big dividing issue. Merkel has tried to persuade Conte to go for an ESM loan. He said No. Paolo Mieli argues in a comment this morning that a proposal by PD leader Nicola Zingaretti in favour of an ESM programme is worthy of serious consideration. Yet Conte's government does not even think it worthy of discussion. Five Star is dead-set against it. Mieli notes that only two Five Star deputies are wavering after Zingaretti's proposal. For so long as Five Star remains united on this issue, there are simply not the numbers in the Italian parliament. The PD, together with Matteo Renzi's lot and Berlusconi, are not anywhere near a majority. The two parties of the right are against, as is the far left. We should not forget that the old parties of the political centre lost their majority at the last election. There exists a whole genre of Italian political journalism that pretends otherwise.

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July 02, 2020

Saving Airbus jobs - a new Franco-German mission?

Airbus announced the cutting of 15,000 jobs in response to the collapse of air travel during the pandemic and the uncertain future of aviation. This is one of the first big job-cut announcements resulting from Covid-19. We expect more to come. Both France and Germany promised funds to help the aviation sector through the crisis. But how much are governments to pump into a sector that is undergoing structural changes, faces a fall in demand due to the pandemic and also climate change?

Complicating the situation is the fact that Airbus is a poster child for Europe's industrial cooperation, with production sites in different member states. The job cuts thus have a political dimension, too. The current plan is to cut 5100 positions in Germany, 5000 in France, 1700 in Britain and 900 in Spain. France and Germany are the two most important sites. Some 45,600 of Airbus' roughly 135,000 employees worldwide are working in Germany and 49,000 in France. This may not be the last word. Negotiations with trade unions and governments just started.

Is this an opening bid for negotiations over subsidies from France and Germany? In response to the announcement the French finance ministry said the numbers are excessive and unacceptable, and they oppose forced departures. The French government already unveiled a €15bn aid package for the aerospace sector last week. Some of the job cuts may also be mitigated by extending part-time working schemes for up to two years. The German reaction was a bit more subdued than the French, but the prospect of state aid through part-time schemes is there too. Peter Altmeier, the German economy minister, said that they have an interest in Airbus surviving the crisis unscathed. He also suggested that Berlin was investing around €1bn in developing quieter low-emissions aircraft, with Airbus among the companies eligible for funding.

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