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[Lionel Laurent] Emmanuel Macron is happy to fight with Italy

Emmanuel Macron has followed the old adage: Never waste a good crisis.

As relations with Italy go from bad to toxic, the French president has taken the unprecedented step of recalling his ambassador from Italy -- the kind of diplomatic spat that doesn’t usually happen between big EU member states. It’s calculated to embarrass Luigi Di Maio, Italy’s deputy prime minister and leader of the anti-establishment Five Star Movement, who brazenly met with the yellow vest protesters on French soil.

But it’s also a relatively risk-free way for Macron to assert himself on the international stage, a useful opportunity as he tries to regain the political initiative from the yellow vest movement ahead of the European Parliament elections this year. It doesn’t hurt to invoke a bit of national pride when you’re competing for attention with a populist movement. He’s also bailed out of February’s Munich Security Conference, amid signs of tension with Germany, as he focuses on home. Macron’s chief concern is getting back to the project of fixing France’s stuttering economy by tackling high spending, high taxes and red tape, a task that’s been made more difficult by the domestic rioters.

His escalation looks justified given Di Maio’s regular provocation of France’s pro-EU president. After accusing France of colonial exploitation in Africa via local currencies pegged to the euro, and encouraging the yellow vest protesters to “keep going” after violent protests against Macron’s policies, Di Maio last week met face to face with a faction of the group. It was ostensibly an effort to build a future political relationship in the European Parliament should the yellow vest movement become a party, but deliberately designed to rile Macron.

By responding with such diplomatic force, France has effectively put Italy on the spot for Di Maio’s actions, according to Jean-Pierre Darnis, an adviser at the think tank Istituto Affari Internazionali. It’s notable that Matteo Salvini -- head of Italy’s right-wing League and Di Maio’s partner in the populist coalition government -- was quick to offer dialogue to Paris. Salvini has had his own complaints about France before, notably around its hypocrisy on migration, but a way out of the crisis is possible.

France and Italy have very close business ties, with about 77 billion euros ($87 billion) in yearly trade between them. That should be be unaffected by the diplomatic spat, says Lorenzo Codogno, a former chief economist at the Italian Treasury.

In the meantime, Macron will try to use the incident to regain the domestic initiative at a time when public support for the yellow vest movement remains high, the French economy is slowing and Marine Le Pen’s National Rally party is leading in the European election polls. Macron’s administration suffered a serious hit to its credibility last year when violence on the streets forced a policy U-turn on tax hikes and an estimated 11 billion euros in extra budget giveaways. That put France on track to breach its EU deficit limits in 2019, another weak spot exploited by the Italians. The European Commission on Thursday cut this year’s French GDP growth forecast from 1.6 percent to 1.3 percent.

With Macron slowly clawing his way back from rock-bottom approval ratings and using a “grand debate” on the economy to build support for his reform program, he’s keen to neuter the political appeal of the yellow vests. More than two-thirds of French people want some kind of referendum on the debate’s conclusions, according to a YouGov survey, an idea that Macron is flirting with.

The French president still thinks the country needs to take some tough economic medicine. But it’s not certain whether he will succeed. His 2022 goal of virtually eliminating the French budget deficit looks increasingly difficult to deliver, according to Deutsche Bank economist Marc de Muizon. France’s debt-to-GDP ratio is not far off 100 percent -- where Italy’s was a decade ago -- and its deficit is expanding, not shrinking. Given all this, you can understand this little bout of political theater.

By Lionel Laurent

Lionel Laurent is a Bloomberg Opinion columnist covering Brussels. He previously worked at Reuters and Forbes. -- Ed.