Bubblereport #10 – The decisive day is 20 December – The rules of the Stability Pact, suspended in the wake of the epidemic, will be reinstated in 2024. EU finance ministers will hold an extraordinary meeting to try to reach a new agreement. Italy’s Giorgetti has already expressed his dissatisfaction and could join forces with his French counterpart to block the draft agreement: the bone of contention remains the 3% budget deficit to GDP ratio, a criticism that could leave Italy isolated

On December 20, the finance ministers of the EU will convene via videoconference in a final attempt to reach an agreement on the stability and growth pact before the end of the year. The outcome of this meeting remains uncertain, and the discontent of Giancarlo Giorgetti, Italy's finance minister, is evident. Following the European Council summit, Giorgetti expressed his dissatisfaction, stating that he did not believe an agreement was imminent. He also voiced frustration about the virtual format of the meeting, likening the EU Council to an ineffective homeowners' association. Giorgetti, known for his critical remarks, seems displeased and suggests that the EU Council is not an effective forum.

It appears that Giorgetti is unlikely to achieve his desired outcome and is expressing frustration accordingly. While the current deal being negotiated is not the worst-case scenario for Italy, it falls short of Giorgetti's preferences. Italy will be required to accept fiscal tightening and will not attain the coveted golden rules for investment.

Importantly, this situation represents a personal setback for Giorgetti. Within the Italian right, a tension exists between those advocating cooperation and those favoring confrontation in dealing with Brussels. Giorgetti aligns with the cooperation camp, which has been the prevailing approach of Giorgia Meloni's government in its dealings with the EU on issues such as migration and the fiscal framework.

The limitations of the stability and growth pact negotiations are evident. Christian Lindner, with more leverage and a political career at stake, was more willing to take a hardline approach. France and Italy face a choice between aligning with Lindner's vision or reverting to the old rules. As France aligns with Germany, Italy finds itself isolated in these negotiations.

Looking ahead, this episode raises concerns about how Meloni's government might handle future crises. The lesson learned suggests that constructive engagement may not yield the desired results for Italy. Instead, a more confrontational approach, threatening to disrupt the status quo, appears to be the path to achieving objectives. This approach, exemplified by Lindner, may have consequences that he or his successors come to regret in the future.