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Italy Bows to Europe, but Claims Victory in Budget Fight

The drawn-out budget battle between Italy's new establishment-challenging populist government and the budget hawks of the European Union is over – for now.

CASTELBUONO, Sicily (CN) – The drawn-out budget battle between Italy's new establishment-challenging populist government and the budget hawks of the European Union is over – for now.

The halftime score: Italy 1, the EU 1.

On Sunday, Italy's lower chamber passed a revised budget for next year that is more modest in spending than a previous proposal that ruffled EU financial institutions because it exceeded EU-mandated spending limits. The budget is expected to be approved by the EU. 

Italian Interior Minister Matteo Salvini. (Riccardo Antimiani/ANSA via AP)

Italy's newfangled populist power-sharing coalition government is an interesting specimen to watch as Europeans head towards continent-wide elections in May to form a new European Parliament.

The elections are expected to reflect a rising level of public discontent across Europe, a rancor that also brought this new government into power in Rome by an Italian electorate fed up with years of weak growth, immigration and lackluster EU policies.

Informally, Italy's government is known as the gialliverdi, or the yellows and greens, the colors worn by political supporters of two different political parties.

The coalition is odd because it combines a maverick left-leaning direct-democracy party, the 5-Star Movement, and a far-right party dominant in northern Italy, the League, which is strongly anti-immigrant and in the past advocated for the secession of northern Italy.

The 5-Stars (the gialli, or yellowswon heavily in the south campaigning on an agenda of social reforms and social spending while the League (the verdi, or greens) solidified its strength in the north with a get-tough stance on illegal immigration and crime. Both parties have advocated anti-EU views.

The 5-Stars exited the March elections as Italy's largest party with about 33 percent of the vote, a stunning performance for a political party that was a laughing stock only a few years ago.

This amorphous party was born from rallies held by Beppe Grillo, a popular comic, who railed against corruption and bad government in curse-laced rants.

At its inception, the movement was grassroots and modeled on direct-democracy. To this day, 5-Star members vote online to determine party policy. Its ranks are made up of a younger generation of politicians, led by the baby-faced 32-year-old Luigi Di Maio, who is Italy's deputy premier in charge of economic development, social services and labor issues.

The party espouses environmentalism, progressive politics and social equality. This is its first time in national government and much was at stake for Di Maio and his 5-Stars in getting a first budget passed.

They succeeded on Sunday, as a deadline approached.

After the vote, Di Maio said he was very satisfied. But tensions were evident and a few members of his party quit.

Spending was set aside in the revised budget that sets up a form of universal income, or “citizens' income,” to be doled out along with job training. The 5-Stars had made that a key campaign promise.

Their coalition partners in the League also supported the budget, though there was more criticism of it by those on the right. The League is being courted by other right-wing parties with the temptation of forming a new government.

The League is led by Matteo Salvini, a media-savvy and selfie-taking politician who's become a major force in European politics since seizing power. He is also a deputy premier and the interior minister.

Salvini’s outrageous statements, pledges to make Italy strong again and harsh measures to deport illegal immigrants often make headlines. He became a lightning rod this summer by barring refugees and asylum-seekers picked up in the Mediterranean Sea by humanitarian ships from landing in Italy.

As elsewhere, Italy's March elections saw a dramatic collapse of establishment parties on the left and right. The defeat was particularly hard on the main center-left Democratic Party.

The EU threatened to sanction Italy unless it revised down its spending goals. EU rules put a 3 percent ceiling on annual deficits in relation to gross domestic product.

Italy is sometimes called “the sick man of Europe” because it is heavily in debt and its economy, one of Europe's largest, has been stagnant for years while unemployment is high.

The national budgets of EU member states need the approval of the EU and its financial organs. Italy's financial markets were strained by the weeks-long budget battle.

Fiscal policy is a major source of disagreement in Europe. Since the 2008 financial collapse, Europe's leaders have agreed to limit public spending. But this policy, known as austerity, is unpopular and many economists argue it is stifling economic growth and feeding anti-EU sentiment.

“I hope this is the last budget we make with Brussels with long and complicated negotiations,” Salvini said in an interview with Corriere della Sera, a national newspaper.

He said the EU’s veto power over national budgets should be done away with.

Courthouse News reporter Cain Burdeau is based in the European Union.

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