REPEAT: MNI: Italy Offc'ls See German Impasse EU Bodies Chance

Repeats Story Initially Transmitted at 13:50 GMT Nov 21/08:50 EST Nov 21

--End of Berlin EU Supremacy Not Necessarily A "Good" Thing

--EU Southern Periphery "Not Strong" Enough To Lead EU Project

By Silvia Marchetti

     ROME (MNI) - Germany's failure to form a new government and the subsequent

political stalemate may push the main European Union institutions to a more

active role in pursuing the EU integration project, several senior Italian

officials have told Market News.

     One government source told MNI that even though the end of Germany's

'Grosse Koalition' era marked a modest decline in Berlin's supremacy in the EU

by opening space to other European protagonists in the short-term, it also posed

the risk of halting the overall EU integration process in the longer run.

     "We all know that without a strong Germany there is little chance to move

on with further integration, but right now Germany is politically weak and the

union needs it to be strong," said the source, who noted, however, that

historically the formation of German governments has always been a rather

complex and long process.

     On the other hand, paradoxically, a weaker Germany could "shake up" the

rest of Europe to adopt a more central role in driving reforms, added the

official, "mainly by strengthening the European institutions that have been

eclipsed" by Berlin's overwhelming power in recent years.

     Boosting EU representation at the next European Parliament elections, along

with paving way to a central budget and finance ministry remain paramount

challenges, added the source. 

     Other countries, including Italy, could take a leading role in driving the

integration process as it has done in past years, but times are tough at present

for all European nations, he observed.

     "When Matteo Renzi was premier in 2014, we launched an ambitious reform

road map for the EU, starting with the whole fiscal flexibility debate. But now,

even Italy faces political uncertainty ahead of the upcoming general vote: let's

just hope that whatever government rises, it will be strong enough to continue

along the EU reform path," said the official.

     It's obvious that the union's future cannot depend on the destiny of just

one nation like Germany, despite how strong it may be economically, added the

source. 

     "Yet today Germany is politically weak and its supremacy in the union is

facing a crisis point: the only way out is to strengthen the EU institutions

through enhanced representation," the government source said.

     Democrat deputy Giampaolo Galli, member of the Lower House budget

committee, warned however that the end of Germany's Grosse Koalition "reign of

splendour" was nothing to cheer about, but rather a "destabilising, worrying

factor" that could raise instability across the whole bloc, with a negative

impact on the European integration project.

     "All major EU challenges and reforms, from the banking union completion to

the common defence and safety policy, need to be spearheaded by Germany. But

Germany needs to have a stable and strong government to support such crucial

reforms across the eurozone," said Galli.

     Eventual changes to existing EU treaties and the introduction of a public

backstop in the case of bank crises require "a solid German government capable

of assuming its own responsibilities and one with full powers; both of which are

now missing in Berlin and we don't know for how long this will be," he added.

     A second government source pointed-out that Germany may still be "the

all-mighty EU nation, but a prolonged phase of political instability could, even

there, jeopardise its economic growth and supremacy".

     According to Galli, however, the temporary "power vacuum" in Berlin could

not be exploited by any other member state at present.

     "A power shift to the southern periphery, right now, is unthinkable and

impossible. All southern countries are too vulnerable and weak to take on such a

mission. Spain faces the Catalan mayhem, Greek has its own debt issues, and

Italy has an uncertain future," he said.

     A source close to Rome's government admitted that in a way, Berlin's

failure in forming a new government was sort of "consolatory" underlining that

all EU nations, both the powerful and weaker ones, were facing  problems in

building, and maintaining, solid majorities to enable and ensure governability.

     "If even virtuous Germany fails, then, at the very least, how can we expect

any better from Italy?" said the official, expressing scepticism that the next

Italian government, due to be elected next spring, could be a stable one given

that the new controversial electoral system favours coalitions among different

parties just for the sake of getting them into parliament.

     France as well is facing political weakness and appears to be unable to

take over Germany's leadership role in Europe, argued Giovanni Orsina, a

director of the School of Government at Rome-based LUISS University.

     "French President Emanuel Macron, after winning the presidential elections,

is now in a declining phase. He's losing popularity and strength. The union's

political engine has so far been the Paris-Berlin axes, yet now Paris is too

weak even to make just that work, let alone substitute Berlin," said Orsina.

     In Orsina's view, Europe's real problem is its missing "third leg". But, at

present, no other EU member state has the standing to step up, with the southern

periphery too "fragile" and first must deal with soaring debt levels in order to

boost its credibility on the European stage.

--MNI London Bureau; tel: +44 203-586-2225; email: les.commons@marketnews.com