Thursday

15th Nov 2018

EU leaders worried about Italy's budget

  • Italy's PM Giuseppe Conte is listening to French president Emmanuel Macron on the sidelines of the summit (Photo: Council of the European Union)

Concerns over Italy's budget spending adding to the massive debt of the eurozone's third largest economy could hamper efforts to reform the framework of the EU's single currency, Dutch prime minister Mark Rutte warned his Italian counterpart on the sidelines of the EU summit on Thursday (18 October).

EU leaders discussed eurozone reforms and the Italian draft budget at their summit in Brussels, with concerns on the rise over the planned budget boost by Rome's populist coalition government.

Read and decide

Join EUobserver today

Support quality EU news

Get instant access to all articles — and 18 year's of archives. 30 days free trial.

... or join as a group

Italian prime minister Giuseppe Conte held bilateral meetings with the Dutch, German and French leaders.

Rutte, who has been increasingly leading a group of fiscally-conservative eurozone countries, said that the expected higher deficit was "not helpful" in the context of the debate about the future of the euro.

"[This debate] does not become any easier when such a large member state appears not to stick to the agreements from the stability and growth pact," the Dutch leader warned.

During the meeting with EU leaders, Conte focused his speech on Italian reforms.

German chancellor Angela Merkel told reporters after the meeting that Conte briefed her on reforms, from the fight against corruption to the transparent digital structure of public administration, but that on the budget, Italy needs to engage in a "positive dialogue" with the EU commission.

Echoing Merkel, Rutte said reforms were "always good", but that implementing them did not give a state an excuse to increase its deficit beyond what was agreed in the stability and growth pact.

Dangerous debt

EU officials have already been warning Italy over its planned 2019 budget, which is expected to increase the country's debt, which currently stands at 133 percent of its GDP and which is the second biggest in the eurozone after Greece. The EU ceiling is 60 percent.

The EU criticism came 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. The previous government promised to keep the deficit at 0.8 percent next year.

"All over-indebtedness is dangerous in my opinion," Austrian prime minister Sebastian Kurz said at the EU summit.

The EU commission has the task of checking if budget plans stick to EU rules.

Conte said on arrival at the EU summit that the budget plans boost welfare spending, cut the retirement age and hike the deficit, and acknowledged they were unlikely to please the commission.

Euro commissioner Pierre Moscovici was in Rome on Thursday to hand a letter raising concerns over the draft budget to Italian finance minister Giovanni Tria.

Reviewing the Italian budget plans, the commission could decide to send warnings or to send the budget back to Rome for changes by 29 October.

EU commission president Jean-Claude Juncker said the EU executive has "no negative prejudice against the Italian budget," and will analyse with the same rigour as other budgets.

The EU commission chief said Italy have used all the elements of flexibility of EU rules, and that leaders don't want to add more room for manoeuvre for Italy.

"We [the commission] were very kind, gentle, and positive, when it came to Italy, because Italy is Italy," Juncker said, adding that in the last three years Rome was able to €30bn more without sanctions by the EU's stability rules.

EU leaders are however also eager to avoid a full-on conflict with Rome's populists before the European elections next May.

Reform drive

The leaders also discussed planned reforms to the eurozone to make the bloc more resilient to future crises.

France's president Emmanuel Macron has been pushing for reforms, including a eurozone budget, that irked Germany and the Netherlands among other fiscal hawks that are worried that rich member states would have to hand out more poorer, less competitive EU countries.

Rutte's warning exposes that Italy's planned budget underlines those fears, and could halt the reform process.

The reforms under consideration are partly to ensure that the eurozone would have enough money in case of a major banking crisis to resolve failing banks and to prevent bank runs with the help of a deposit guarantee scheme - completing the EU's banking union.

The European Stability Fund (ESM) could get new powers of regularly monitoring economies and could step in as European monetary fund. It could lend to governments that have been conducting sound economic policy, but were hit by external crises.

EU leaders want decisions to be taken at the December summit on these instruments.

EU leaders also talked about a budget designed for the eurozone, an idea pushed by Macron. Some countries would like to discuss the issue already as part of the EU's long-term budget kicking off in 2021, an idea supported by Germany.

EU warns Italian populists on Greek-type crisis

The EU commission president urged Rome to rethink its budget plans to avoid a Greek-style euro crisis. Meanwhile, Italy's finance minister tried to calm his colleagues in Luxembourg.

News in Brief

  1. UK's May defends Brexit deal to MPs, after ministers resign
  2. Brexit MP calls for 'no confidence' vote on May
  3. Denmark blocks Tanzania aid over homophobic crackdown
  4. Second UK cabinet minister resigns over Brexit deal
  5. UK Brexit secretary quits morning after deal agreed
  6. Romanian MPs call for national 'Magnitsky Act'
  7. Tusk: Brexit summit on Sunday 25 November
  8. Full text of Brexit withdrawal agreement published

Stakeholder

An open China brings opportunities to Europe

Some 60 years ago, the first major World Fair after World War II was held in Brussels. Sixty years on, China International Import Expo (CIIE), the first world expo dedicated to expanding imports, will open in Shanghai, China.

Stakeholders' Highlights

  1. NORDIC COUNCIL OF MINISTERSTheresa May: “We will not be turning our backs on the Nordic region”
  2. International Partnership for Human RightsOpen letter to Emmanuel Macron ahead of Uzbek president's visit
  3. International Partnership for Human RightsRaising key human rights concerns during visit of Turkmenistan's foreign minister
  4. NORDIC COUNCIL OF MINISTERSState of the Nordic Region presented in Brussels
  5. NORDIC COUNCIL OF MINISTERSThe vital bioeconomy. New issue of “Sustainable Growth the Nordic Way” out now
  6. NORDIC COUNCIL OF MINISTERSThe Nordic gender effect goes international
  7. NORDIC COUNCIL OF MINISTERSPaula Lehtomaki from Finland elected as the Council's first female Secretary General
  8. NORDIC COUNCIL OF MINISTERSNordic design sets the stage at COP24, running a competition for sustainable chairs.
  9. Counter BalanceIn Kenya, a motorway funded by the European Investment Bank runs over roadside dwellers
  10. ACCACompany Law Package: Making the Best of Digital and Cross Border Mobility,
  11. International Partnership for Human RightsCivil Society Worried About Shortcomings in EU-Kyrgyzstan Human Rights Dialogue
  12. UNESDAThe European Soft Drinks Industry Supports over 1.7 Million Jobs

Latest News

  1. No-confidence calls against May put Brexit deal in doubt
  2. Key points of the Brexit deal (if it ever comes into effect)
  3. Romania heaps scorn on 'revolting' EU criticism
  4. US steps in to clean up Cyprus
  5. 'Decisive progress' on Brexit as British cabinet backs deal
  6. Asylum for Macedonia's ex-PM puts Orban on spot
  7. How the 'EU's Bank' fails to raise the bar on accountability
  8. Knives out on all sides for draft Brexit deal

Stakeholders' Highlights

  1. Mission of China to the EUJointly Building Belt and Road Initiative Leads to a Better Future for All
  2. International Partnership for Human RightsCivil society asks PACE to appoint Rapporteur to probe issue of political prisoners in Azerbaijan
  3. ACCASocial Mobility – How Can We Increase Opportunities Through Training and Education?
  4. Nordic Council of MinistersEnergy Solutions for a Greener Tomorrow
  5. UNICEFWhat Kind of Europe Do Children Want? Unicef & Eurochild Launch Survey on the Europe Kids Want
  6. Nordic Council of MinistersNordic Countries Take a Stand for Climate-Smart Energy Solutions
  7. Mission of China to the EUChina: Work Together for a Better Globalisation
  8. Nordic Council of MinistersNordics Could Be First Carbon-Negative Region in World
  9. European Federation of Allergy and AirwaysLife Is Possible for Patients with Severe Asthma
  10. PKEE - Polish Energy AssociationCommon-Sense Approach Needed for EU Energy Reform
  11. Nordic Council of MinistersNordic Region to Lead in Developing and Rolling Out 5G Network
  12. Mission of China to the EUChina-EU Economic and Trade Relations Enjoy a Bright Future

Join EUobserver

Support quality EU news

Join us