Europe's Left and Right Share a Common Call: State Intervention
Europe's Left and Right Share a Common Call: State Intervention
MILAN—Antiestablishment parties gained support across the continent in recent years by attacking the EU’s immigration and fiscal rules. Less noticed has been their growing pushback against an EU economic orthodoxy that favors markets and competition over state intervention.
In Italy, the new antiestablishment government engineered the state-owned railroad’s offer to buy a controlling stake in perennially stricken airline Alitalia. The railroad, Ferrovie dello Stato Italiane SpA, made its offer, the terms of which aren’t public, contingent on finding an airline as a co-investor. Should a deal be sealed, the Italian government would likely end up with a direct Alitalia stake of about 15% and would control the airline through that holding together with Ferrovie’s share.
The government in Rome, comprising the far-right League and the ideologically eclectic 5 Star Movement, also wants to nationalize water utilities, create a government-controlled bank to finance the economy, and has floated the idea of nationalizing the highway system.
Italy’s economic development minister, Luigi Di Maio, has led the government’s attempt to revive Alitalia. Here, he speaks to reporters after meeting with Alitalia labor unions.
Photo:
angelo carconi/epa-efe/rex/Shutterstock
Similar market-skeptic ambitions have emerged in other European countries. Calls for nationalizations have come from the populist left in Spain and the nationalist right in Hungary and France. Their common target is the technocratic consensus of Europe’s broadly centrist mainstream parties that the continent needs to privatize, deregulate, limit social protections, boost competition and let in foreign capital in order to grow.
That pro-market orthodoxy among mainstream policy makers, known as “liberalism” in Continental Europe, has guided much EU policy during the past quarter-century. But its electoral support, always inconsistent, has suffered further thanks to scars of Europe’s long financial crisis.
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“The EU’s move towards economic liberalism has come under pressure from time to time in the past, but now that pressure is increasing,” said Fabrizio Onida, professor emeritus of international economics at Bocconi University in Milan.
While many economists argue there is a role for the state in some economic sectors, such as running public transportation and as a regulator of certain industries, they generally decry the movement of private companies to state ownership through nationalizations.
Alitalia has had a troubled past decade under various private owners, costing Italian taxpayers about €10 billion ($11 billion) in that period, according to Andrea Giuricin, a professor at Milan’s Bicocca University. Last year, the bankrupt company faced liquidation until Italy’s previous center-left government extended a €900 million bridge loan meant to tie the airline over until administrators could find a buyer. The new, populist government has decided the buyer should be the Italian state itself.
Poking the Establishment
EU economic orthodoxy favoring markets and competition over state intervention has come under attack from antiestablishment parties on the left and right
- ITALY—Populist forces from the left and right in government pushed the state-owned railroad to make an offer to buy Alitalia. They also have argued for nationalizing water utilities, creating a government-controlled bank and nationalizing the highway system.
- SPAIN—Leftist political party Podemos, which won more than a fifth of the vote in the last general election, has proposed nationalizing some sectors.
- HUNGARY—Longtime Prime Minister Viktor Orban has used nationalizations to convey national strength.
- FRANCE—Marine Le Pen, the far-right leader who reached a runoff in last year’s presidential elections, advocates nationalizing banks and raising trade barriers.
- POLAND—The populist right-wing government has pushed for the government to buy back control of Polish banks from foreign investors.
Italy has stepped in to prop up Alitalia before. The national post service,
Poste Italiane
SpA, was briefly a shareholder earlier this decade, while the government has also given financial inducements to private investors. But such stopgap measures were meant to pave the way to Alitalia’s being a viable private-sector company. Now, in contrast, the government is eyeing a future under de facto state control.
Analysts have questioned whether Ferrovie, whose CEO was installed by the new Italian government in July, stands to gain anything from the tie-up.
A Ferrovie spokesman declined to comment.
Italy’s economic development minister, Luigi Di Maio, who heads the 5 Star Movement, tried to get other companies in which the government has a stake, including oil giant Eni SpA, electricity producer Enel SpA and defense contractor
Leonardo
SpA, to invest in Alitalia. Those companies resisted.
Delta Air Lines Inc. and
EasyJet
PLC submitted their own offers for Alitalia, but the Italian airline’s bankruptcy commissioners preferred the Ferrovie bid. The two companies are now in talks with Ferrovie to become co-investors, according to a person familiar with the discussions. Delta and EasyJet declined to comment.
Lufthansa
had earlier shown interest, but CEO Carsten Spohr recently told analysts: “Surely, we will not be interested to be co-investors with a government in an airline which needs to be restructured.”
Public ownership of key industries is an old preference of Europe’s left. Spain’s Podemos, which won more than a fifth of the vote in the last general election, proposes nationalizing sectors such as energy and telecommunications.
The Italian government has stepped in to prop up Alitalia before. Pictured, an Alitalia crew member walks past striking employees in Rome, April 2017.
Photo:
remo casilli/Reuters
But the renewed push for state interventionism extends also to Europe’s nationalist right, which has a long tradition of suspicion toward free markets, laissez-faire economics and especially foreign capital. For the nationalist right, a strong state role in the economy is about defending national sovereignty.
Hungary, under vocal EU critic Viktor Orban, has turned to nationalizations as part of its declared goal of promoting national strength. Critics say such talk is partly cover for the growing corruption of a new economic elite close to the premier. Poland’s nationalist government has been pushing to “re-Polonize” banks by having the treasury buy shares from foreign investors and discouraging further foreign stakes.
In France, far-right leader Marine Le Pen has also called for nationalizing banks and raising trade barriers. President Emmanuel Macron’s market-oriented strategy has come under attack in the past month with violent street protests engulfing the country.
“These calls for nationalizations, a policy that has been out of vogue in Europe because of the shortcomings of public ownership, are a way to lash out against the establishment,” said Michael Plummer, an economics professor and the director at Johns Hopkins University’s School of Advanced International Studies in Bologna.
Many economists doubt the populists’ preferred industrial policies would be any more efficient now than in the past.
“The growth of state intervention in Italy doesn’t bode well for a country that has had such a sad experience of the state running companies,” said Professor Onida from Bocconi University.
—Jon Sindreu in London contributed to this article.
Write to Eric Sylvers at eric.sylvers@wsj.com
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