June 11, 2018 / 7:29 AM / 2 months ago

Daily Briefing: Migrants, euro, NATO - Rome gets to work

LONDON (Reuters) - Italy’s new government is getting down to work - with implications both good and awkward for its European neighbours.

Italy's Prime Minister Giuseppe Conte and NATO Secretary-General Jens Stoltenberg review the guard of honour at Chigi palace in Rome, Italy, June 11, 2018. REUTERS/Tony Gentile
Malta takes in nobody. France pushes people back at the border, Spain defends its frontier with weapons. From today, Italy will also start to say no to human trafficking, no to the business of illegal immigration

On the plus side, Economy Minister Giovanni Tria used his first media interview to stress Rome has no plans to leave the euro, and to talk up plans to reform the Italian economy and cut debt. On the negative, it is in a stand-off with Malta over who should take in a humanitarian ship carrying more than 600 migrants. Italy's interior minister has said he will not let it dock and has asked Malta to take it - something it has refused.

This episode brings to a head Italy’s grievances with the rest of Europe over the hundreds of thousands of migrants who have reached its shores in the past five years, with its neighbours trying as much as possible to make sure they go no further north. Separately, Prime Minister Giuseppe Conte will meet NATO officials today after Italy signalled it wants to cut back its overseas operations, notably in Afghanistan.

Back from the disastrous Trump-dominated Quebec summit, British Prime Minister Theresa May will continue efforts today to persuade rebel Conservative lawmakers to back the government in a series of parliament votes on the shape of Brexit, starting on Tuesday.

Ironically, the fragility of May’s position may be helping her: pro-EU parliamentarians will have to reflect on the fact that if they shoot her Brexit plan down, that could weaken her leadership and they could end up with a hard Brexiter in Downing Street - or, even worse for them, Labour’s Jeremy Corbyn. In the meantime, Brexit Minister David Davis meets his EU counterpart Michel “Ticking Clock” Barnier in Brussels to discuss the slow progress on negotiations.


With a choice of seeing the weekend's fractious G7 summit as the either end of the 40+-year-old western economic alliance or another high farce in the 18-month Trump administration, world markets appear to have leaned toward the latter.

Trump’s post-summit rejection of a previously signed communique clearly separates the United States from its six traditional global economic allies and underlines global trade tensions.

But the peculiar nature of the Trump administration to date has seen many investors categorise it as yet another in a series of theatrical gestures and eyes just drifted to Tuesday’s summit between Trump and North Korea’s Kim Jong Un.

Already on Monday, Germany’s economy minister Altmaier said Germany remains ready to talk through any trade disputes with Washington. With the exception of modest losses in Shanghai, most of Asia’s major benchmark stock indices – from Tokyo to HK and Seoul - were higher on Monday and European stock futures were up about 0.5 percent too.

Away from the tweets and fits of pique, two more positive developments appear to have had more of an influence on early Monday markets – the Swiss rejection in Sunday’s referendum of a radical monetary policy overhaul that could have hobbled domestic banking, and soothing noises on economic policy from the incoming Italian government.

Italy’s Economy Minister Tria said the new government had no intention of questioning Italy’s euro membership and instead planned on cutting the debt levels. The Italian 10-year government yield premium over Germany narrowed almost 30 basis points first thing on Monday, to about 240 bps.

The Swiss franc was marginally weaker against the euro after the referendum result. In a week likely to be dominated by a U.S. Federal Reserve interest rate rise on Wednesday and likely signals from the European Central Bank on Thursday of an end to its bond buying scheme by the end of the year, the euro/dollar exchange rate was firmer above $1.18 first thing.  Ten-year U.S. Treasury yields were also firmer. Brent crude oil was lower.

— A look at the day ahead from European Economics and Politics Editor Mark John and EMEA markets editor Mike Dolan. The views expressed are their own. —

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