Italy faces an impossible choice

Italy’s populist rulers are famous for their contradictory positions. They’re against bailing out banks, but also oppose bailing in investors. They want to cut taxes, increase spending, but also want to keep public debt in check. They are in favour of infrastructure projects, but cannot make up their mind on whether a high-speed train link to France should go ahead.
The latest policy paradox relates to foreign affairs. The Five Star Movement and the League have spent years cosying up with Trump and Putin, while disdaining traditional European partners like Germany and France. The guiding principle seemed to be opposing EU consensus while supporting anti-establishment forces.
The trouble for the two parties is that it’s easy when you share common enemies with your new friends, but far harder when you want to hang out with someone who doesn’t pass muster. Rome looks set to join China’s controversial Belt and Road
Initiative (BRI) during a visit from Xi Jinping. But Washington isn’t happy. “Italy is a major global economy and a great investment destination. Endorsing BRI lends legitimacy to China’s preda- -tory approach to investment and will bring no benefits to Italian people,” the National Security Council tweeted.
Italy is caught in the middle of a geopolitical struggle that will define international relations for decades. On the one side, there’s an increasingly assertive China, which is using its wealth to buy influence across the world. On the other, there’s a revanchist US, which is locked in a muscular confrontation with Beijing over trade.
Giuseppe Conte, Italy’s prime minister, is trying to play both sides. In an interview with Italian newspaper Corriere della Sera, he said, Italy remained firmly within the Western camp, including Nato military alliance, but added that he saw no reason to avoid an agreement with China. He argues that Italy has included in memorandum of understanding some important principles, which comply fully with the EU’s China strategy. This will encourage China to adopt European standards, he says.
The government is split, though. China fans include Giovanni Tria, technocratic finance minister, and Luigi Di Maio, the Five Star leader. They see the opportunity for bringing investment to Italy. Matteo Salvini, leader of the the League, is more skeptical. He says he his fellow ministers have a point, but he doesn’t want Italy to become anybody’s colony.
Yet even Salvini’s nationalist party is divided. Michele Geraci, a junior economy minister and academic with years of experience working in China, negotiated the Belt and Road deal. Guglielmo Picchi, deputy foreign minister who prides himself on his ties to Trump’s inner circle, called for more scrutiny.
Italy is certainly not alone in this awkward diplomatic straddling. Trump’s administration is putting pressure on several countries, including Britain and Germany, to keep Huawei Technologies Co., China’s largest tech company, away from 5G wireless networks. Nor should one forget that previous Italian governments have done deals with Beijing, allowing Chinese investment into country’s gas and electricity network.
But Rome will soon realise it can’t have it both ways. If it signs a memorandum with China, that will immediately cool relations with Trump. Similarly, should Italy perform a U-turn, that would downgrade Xi visit – hardly a trivial matter. Any move will also impact on Italy’s relationship with its EU allies, who are moving to a more skeptical view on Chinese investment after two decades of remarkable openness.
Italy’s government has every right to pick whichever side it pleases. But this won’t be a trivial trade matter, it will be a major geopolitical moment that affects the way the country is seen from abroad.

—Bloomberg

The League and Five Star are finding out that governing is about choices. And they have consequences.

—Bloomberg

Daniel Moss is a Bloomberg Opinion columnist covering Asian economies. Previously he was executive editor of Bloomberg News for global economics, and has led teams in Asia, Europe and North America