Members of the Swiss Young Socialists demonstrate against the World Economic Forum during the annual meeting in Davos, Switzerland, yesterday. Reuters
Europe’s divisions were on display yesterday at the World Economic Forum in the Swiss ski resort of Davos, with key leaders arguing over the region’s big issues, from Brexit to the Italian populist government’s tough approach to the EU.

Dutch Prime Minister Mark Rutte warned of divisions in the EU beyond Brexit: between the generally richer countries in the north and the poorer south centred on an array of issues including Italy’s stand against the bloc’s debt rules.

The Italian government has decided to ramp up spending far beyond EU expectations and only backed off slightly after the EU threatened legal action. Concerns remain that the Italian government’s spending plans will add to the country’s huge debt load and potentially rekindle financial jitters dormant since 2015, when Greece was bailed out for a final time.

Rutte said his citizens are asking why the Netherlands is implementing measures to abide by the budget rules when others like Italy are not. The dispute, he said, is “creating distrust between north and south”.

Mateusz Morawiecki, prime minister of Poland, which has had run-ins with the EU over its moves to overhaul the judiciary, said Italy was not being treated the same as France.

France’s relatively high deficit over the past few years was widely seen as being tolerated by the EU. The EU, he insisted, “should apply the same standards for different member states”.

Tensions have grown between Italy and France recently over how to handle migrants travelling to Europe by boat. Italy’s interior minister, Matteo Salvini, the head of one of two populist and eurosceptic parties leading the country, this month called French leader Emmanuel Macron - who is pro-EU - “a terrible president”.

The diplomatic spats are an unwelcome backdrop for the EU, due to lose key member Britain.

British Prime Minister Theresa May had her Brexit deal voted down by parliament and is struggling to find a solution. That is raising the possibility that Britain might fall out of the EU without a deal on March 29, which could have huge repercussions for the economy as tariffs and border checks are re-established.

Bank of England Governor Mark Carney said in Davos that British banks are financially strong enough to survive such a scenario. But he warned that ports and borders will face many logistical problems. AP