Just before 2018 came to a close, the Italian Senate and the Chamber of Representatives gave the green light to a highly controversial expansive budget law in what was one of the EU’s better moments of the year.

It was widely known that some of the Brussels establishment, including members of the European Commission, were not happy with an agreement that would see the Italian government lower its deficit target for next year to 2.04%, significantly down from the original target of 2.4%, but this compromise has temporarily neutralised a potentially explosive political and economic scenario in the blow over the course of the next year.

By hammering out a last-minute deal, the Commission primarily showed its real commitment to negotiate without political preconceptions and its willingness to avoid having to impose potentially disastrous sanctions on Italy. Many in corridors of power in Brussels could argue that the positive outcome of this deal was reached mainly thanks to the moral and political weight carried by the highly highly respected Italian President Sergio Mattarella, though others could suggest that the two strong men of the Italian Government, Matteo Salvini and Luigi Di Maio, finally understood that it was the time to make substantial concessions to the EU.

With the war of words that had characterised the negotiations in previous months having largely stopped between the two, the mission of the Economy Minister Giovanni Tria – a champion of stoicism 0 was finally accomplished. Trust in the Italian government was not, however, handed out with substantial cost as the highly sceptical EU Commissioner Pierre Moscovici underlined clearly that the EU will stay vigilant when it comes to monitoring Italian finances.

The positive outcome of the negotiation is an important component in the EU electoral campaign scheduled for next spring, and it will be more difficult for the Italian Eurosceptic to show that the EU is the “bad guy” in the relationship between the national government and Italian voters. Without question, Europe will be a relevant issue in the electoral debate, but other more critical themes including immigration and trade could get more attention.

In the year of Brexit and Yellow Vest riots, an additional crisis with the Italian government would be disastrous for the EU. The strategy of Presidents Trump and Putin in destabilising Europe would have without question accelerated this process.

It important to remember from one side that Italy is likely to fight for the lifting of sanctions on Russia while other major players in the Italian government have emphasised their support Trump.

While instability in the Franco-German axis remains a major concern, a strong Europe needs Italy more that ever.

The third variable in this equation in the role of China. Europe and China are sharing the sort of multilateral governance approach that Trump is trying to dismantle. A strong and influential Italy will provide direct benefits to China as many of the current officials in the Salvini/Di Maio government have supported the Chinese key project “One Belt, One Road”. The Undersecretary of State for International Trade, Michele Geraci, is fluent in Chinese after having spent a decade teaching finance in the country. He is in the process of completely reshaping trade relations with Beijing and creating, for the first time, a multidisciplinary task force gathering key experts and shareholders on bilateral issues.

Geraci’s strategy is to see how Italy can be the leading EU partner in the Belt and Road initiative; a central position that Italy can claim due to its strategic position in the middle of the Mediterranean. The Chinese investment into the Greek port of Piraeus, one of the eastern Mediterranean’s largest seaports and a potential key link when it comes to enhancing the role of southern and eastern ports that are well connected Italian rail and sea hubs like like Venice and Trieste, could be a strategic asset to support the maritime Belt and Road. Geraci sees other collaborations with China, including as a possible investor for Italy’s troubled national flag carrier Alitalia, or as a partner in other joint ventures in Africa.

This Italian engagement with China is generally not looked upon by Brussels as a particularly positive development especially after Italy sharply criticised the EU during the last Trade Council meeting about bloc’s investment screening plan, which some experts say in a tool designed to politically target future Chinese investments in the Europe Union.

This new privileged relationship with China has put Italy in a more influential position on the EU level, particularly after the pro-Trump and pro-Putin sympathies of the current Italian government were not considered a real game changer by the European institutions. The big question moving forward is whether the Salvini/Di Maio coalition government will survive 2019. Di Maio’s left-wing Five-Star Movement remains the weaker of the two partners, having lost a significant level of the support that helped helped catapult the anti-establishment alliance to power in March of last year, with Five-Star emerging as the largest single party in the Italian parliament.

Further complicating matters for Di Maio has been the recent return to the political arena of Alessandro Di Battista, a prominent member of Five-Star, who was a staunch political opponent of a governing alliance with Salvini’s arch-conservative Lega (League) party. Di Battista had been one of key figures in the growth of the Five-Star Movement in its early rise to becoming a national party, but he had largely been out of politics for the better part of two years after he left Italy in 2017 to work as a journalist in the United States. Di Battista announced his return to the political sphere, in part, as a means to be a major player in the run-up to the European elections in May and could potentially emerge as a major challenge to the embattled and less charismatic Di Maio.

The European elections will reveal whether the government lead by Giuseppe Conte still has the numbers to continue down its anti-establishment path, which will clearly depend on the concrete political results from the revised budget.

Still waiting in the wings is Silvio Berlusconi, the former prime minister and leader of Forza Italia, who still hopes that snap elections in Italy would allow him to return to public service he and Salvini at the helm and governing the country, which according to polls, could happen again.                       

Federico Grandesso is a widely published fashion, cinema and European Affairs  expert.