Why Italy has better odds in overcoming 'Belt and Road' risks

April 09, 2019 16:42
Chinese President Xi Jinping shakes hands with Italian Prime Minister Giuseppe Conte as he arrives at Villa Madama in Rome on March 23. Photo: Reuters

During Chinese leader Xi Jinping's state visit to Italy last month, Rome signed a preliminary deal to join the 'Belt and Road’ program, becoming the first G7 entity to participate in the Beijing-led infrastructure initiative. 

Michele Geraci, the Chief Representative in the negotiation and the Undersecretary of State at the Italian Ministry of Economic Development, emphasized that Rome would not fall into the so-called China debt trap despite boarding the Belt and Road train.

The Italian government’s eagerness to bring about welfare pluralism that was pledged during the elections, combined with the incident of the Morandi Bridge collapse in Genoa in August last year, has stirred up much political debate on aging infrastructure in the country. Hence, joining the ‘Belt and Road’ initiative appeared to be a practical solution.

While it remains to be seen whether Italy can avoid becoming too reliant on China funds, the European nation's democratic and legal system, and the EU’s binding power and legislation, would make Rome's odds better than those of Belt and Road participating countries from Africa and South East Asia when it comes to evading the risks.

Despite being strongly supportive of Italy’s move to join the Belt and Road alliance, Geraci emphasized that the country’s laws prohibit their ports to be controlled by foreign countries or capital.

Also, Italy tightened related protective laws while negotiating with China.

As a member of the EU, the Italian government cannot ignore the EU’s laws and pressures. Under the Maastricht Treaty that came into effect in November 1993, the budget deficit of member countries cannot exceed 3 percent of the GDP, while national debts cannot rise above 60 percent of the GDP. Otherwise, there will be sanctions from the EU.

With its debts at 131 percent of GDP, the second highest within the EU (after Greece, where the figure stands at 179 percent), Italy is not exactly fully compliant with such rules.

But at least, when the Italian government tried to increase the target deficit from 0.8 percent to 2.4 percent of GDP in a budget draft last year, the EU intervened and requested Italy to revise the budget plan.

If ‘Belt and Road’ brings negative impact on Italy’s financial position, it will become an issue for the entire EU.

Other than economic considerations, is there any motive for the EU to monitor Italy’s involvement in joining ‘Belt and Road’ initiative? The answer is 'yes'.

As soon as President Xi arrived in Rome, EU member states called for a summit to discuss an evaluation report on the EU’s China policy. In this report, the EU described China as an 'economic competitor in the pursuit of technological leadership' and as a 'systemic rival promoting alternate models of governance.'

China was regarded as an ‘unconditional strategic partner’ in 2003, and then ‘equal strategic partner’ in 2013.

While Beijing has succeeded in achieving a breakthrough with Italy, it is probably not so easy for it to influence the entire EU.

Besides, even though Italy is dominated by a populist government, it is evident that the ‘Belt and Road’ initiative has not yet won unanimous support within the country.

In negotiations with China, Luigi Di Maio, Deputy Prime Minister of the Five Stars Movement, and Geraci were seen as the key advocates. The former has a good relationship with China, having set up a task force to strengthen communication with China, and visiting China several times in recent months. As for Geraci, he has lived and taught in China for over a decade, and is fluent in Mandarin. Boasting such background, Geraci claimed he understood China best, and that he has fully grasped and assessed the risks involved in joining ‘Belt and Road’.

However, Mattheo Salvini, Deputy Prime Minister and Minister of the Interior, as well as Federal Secretary of Northern League, absented himself from all official activities led by Xi, including the signing ceremony related to ‘Belt and Road’.

Salvini also publicly announced that he will not let Italy turn into a colony of foreign powers. When assessing any port investments from China, he said he will carefully consider the proposals "not just once but a hundred times.”

This article appeared in the Hong Kong Economic Journal on April 3

Translation by Jennifer Wong

[Chinese version 中文版]

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Associate professor and director of Global Studies Programme, Faculty of Social Science, at the Chinese University of Hong Kong; Lead Writer (Global) at the Hong Kong Economic Journal