BTPS-Bunds a bit wider this week. Source: Bloomberg
BTPS-Bunds a bit wider this week. Source: Bloomberg

The German view of Europe is somber and cautious rather than triumphalist. Populism is in abeyance but could return with a vengeance; Macron has ambitious reform plans that will face bitter and determined opposition from the French trade unions; migration has become the wedge issue in Italy.

The Mediobanca scenario I circulated a couple of weeks ago (two years of de facto rule from Brussels followed by a French-style reform candidate (Macaroni?) is not the only, or the likeliest, outcome.

Die Welt, the German newspaper closest to Merkel, notes a political shift to the right in Italy, with Berlusconi’s Forza Italia the biggest winner in last week’s municipal elections. For example, a coalition of FI and the Lega Nord won in Sesto San Giovanni, an industrial town just north of Milan where the left had ruled for 72 consecutive years. The deciding issue was immigration, the rapidly-increasing Muslim population and plans to build the largest mosque in Italy with funding from Qatar.

Die Welt adds:

On the other hand, the populists of the five-star movement of the comedian Beppe Grillo are not on the rise. They have shown – for example, the example of the young mayor of Rome, Virginia Raggi – how not to do it. Since her election in June 2016, Raggi has been dealing mainly with scandals about corruption and misuse of government funds, rather than with the governing of the difficult metropolis.

In many cities, a surprise comeback came from the right wing. This confirms a new tendency that goes across all political camps: the so-called Civismo, the policy of citizens’ movements. Election alliances at the local level, which always bring several parties behind them, act pragmatically and pursue concrete goals, do not want to make party politics. Such alliances could be found in important cities such as Parma, Palermo and Genoa.

Separately, Die Welt reports that Italy is now turning back ships that have rescued migrants whose boats capsized in the Mediterranean. Only Italian rescue ships are being given permission to land. Greece meanwhile has refused German demands to accept migrants that left Greece for Germany.

DIe Welt comments that the defeat of populism in recent elections is a contingent and fragile event that could reverse quite quickly.

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