Tuesday

25th Jun 2019

EU warns Italian populists on Greek-type crisis

European Commission president Jean-Claude Juncker vowed to be "very strict" with Italy on its proposed 2019 budget, warning Rome against going ahead with its planned boost in spending.

"Italy is distancing itself from the budgetary targets we have jointly agreed at EU level," Juncker said in a speech in Germany on Monday (1 October).

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"I would not wish that, after having really been able to cope with the Greek crisis, we'll end up in the same crisis in Italy. One such crisis has been enough," he said.

"If Italy wants further special treatment, that would mean the end of the euro. So you have to be very strict," Juncker added.

Last Friday, EU officials already warned Italy over its planned budget, which is expected to increase the country's debt, which currently stands at 131 percent of its GDP and which is the second biggest in the eurozone after Greece.

The EU ceiling is 60 percent.

The EU frowned after Italy's populist government, a coalition of the Five Star Movement and League parties, set the 2019 deficit target at 2.4 percent, which spooked investors.

Italy's economic minister Giovanni Tria had earlier argued that investments would fuel economic growth over the next two years, putting debt on a downward path.

Rome's detailed proposals will have to be submitted for review to the European Commission by 15 October.

A rejection by the commission could widen the rift between Brussels and Italy's eurosceptic leaders - a relationship that was earlier strained by Rome's hardline anti-migration policies.

But a political confrontation with the EU could play into the hands of Italy's far-right interior minister, Matteo Salvini, who aims to create a eurosceptic league in Europe to contest European Parliament elections next May.

Devil in the details

Eurozone finance ministers meeting in Luxembourg on Monday also expressed concern over Italy's plans, but, in an effort to diffuse tensions, they stressed the need to see further details before taking a firm position.

Dutch finance minister Wopke Hoekstra said that news from Italy was "not very reassuring".

"As I understand it, talks are still continuing. There's been a sharp reaction from the market, as well as some preliminary remarks from the commission. I think we're very clear that this isn't very reassuring, but we should hold our horses," he told reporters.

"There are rules in the EU which need to be respected. Austria and other countries do what is foreseen by the rules and the same should be the case for Italy. I am confident the Italian finance minister will be able to enforce a sensible solution," Hartwig Loeger, Austria's finance minister said.

Eurogroup president, Portuguese Mario Centeno, said after the Luxembourg talks that more detail was needed to fully analyse Italy's planned budget and for the EU commission to make its assessment.

"We need sound policies to protect it [the euro] - it's up to the Italian authorities to come up with a sustainable and credible budgetary plan," he said.

Italian minister Tria was reassured his colleagues that the debt ratio would not climb.

Meanwhile, Italys deputy prime minister Luigi Di Maio and Salvini celebrated the budget agreement, which was agreed despite reservations from Tria, who, according to the Italian media, has considered resigning - a report he has denied.

De Maio said earlier that his government was not seeking an EU clash.

"The dialogue begins now with the EU and with major private investors, and we are not seeking a conflict," he said.

EU leaders worried about Italy's budget

Some EU leaders warned that Italy's plan to boost its budget spending despite the second largest debt in the eurozone, could hamper efforts to reform the single currency's framework.

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