Submitting its deficit-heavy budget to the European Union this week, Italy issued an overt challenge to the supranational organization. Still, Italy has good reason to be confident it will win this showdown.
Italy's budget submission is a significant and unambiguous affront to EU authority. Italy has not only broken a standing EU rule to reduce its deficit spending on a previously agreed schedule, but it has also done so in a way that boosts Rome's long-term deficit and structural debt load. That's because Italy has boosted its entitlement spending without engaging in any of the employment law and spending-related reform that it needs to build long-term budget stability.
Still, the EU is in no position to harshly punish Italian insolence. "Italexit" is why — the possibility of Italy following in the footsteps of Britain's Brexit and voting to leave the EU.
Top EU officials are keenly aware that Italy's populist-right/alternate-populist government knows that its power rests on public disenchantment with EU governance. And EU leaders know that if they push Rome too hard, they risk stimulating an Italian movement to leave in short order. Equally important, the Italian government has the character and interest to believe that the time for a showdown is the here and now.
I suspect that the EU will complain and condemn Italy, but do little else. Whether in terms of its own wasteful spending or the arrogance of its leaders or its disinterest in democratic accountability, the EU doesn't exactly inspire popular confidence. Had it governed better in terms of balancing marginal-interest states like Italy with the power-interests of France and Germany, the EU might have had the popular confidence to enforce its own rules. But it doesn't, and until the EU decides to focus on being more efficient and democratic, it will continue to rot.