Sunday

12th Jul 2020

Italy defiant on budget on eve of EU deadline

  • Rome: 'Only way to respect European parameters is to commit suicide,' Luigi di Maio said (Photo: Nick Kenrick)

Italy would be committing economic "suicide" if it fell in line with EU rules, its deputy leader has said, in a sign that Rome has little intention of bowing to pressure ahead of Tuesday's budget deadline.

"The only way to respect European parameters is to commit suicide, which then leads to recession," deputy prime minister Luigi di Maio, from the 5 Star Movement (5MS) party, told reporters in Rome on Monday (12 November).

Read and decide

Join EUobserver today

Support quality EU news

Get instant access to all articles — and 20 years of archives. 14-day free trial.

... or subscribe as a group

  • Matteo Salvini mocked Jean-Claude Juncker on Sunday (Photo: European Parliament)

Matteo Salvini, Italy's interior minister, from the League party in the coalition, was equally defiant.

Italy did not intend to "touch one iota" of its spending plan for 2019 and says "No" to "threats and [EU] commissioners", he said.

He also mocked European Commission president Jean-Claude Juncker in a speech on Sunday.

"The only letters I accept are from Santa Claus," he said, referring to the commission chief's warning letters on Italian overspending. Santa Claus drinks "just a bit of mulled wine, to go with his chestnuts," Salvini added, alluding to rumours that Juncker drinks too much.

"Inspectors in Rome? We just need inspector Derrick and lieutenant Columbo, then we'll have all of them," Salvini also said, in a joke referring to two TV characters and the prospect of the EU sending budget monitors to Italy in future.

The two men's intransigence stood in contrast to the more conciliatory tone of Italy's finance minister, Giovanni Tria, who has been going back and forth to Brussels in recent weeks to try to avoid a clash.

Tria had, in the past, also said the EU demands would amount to "suicide".

He has said Italy would maintain its deficit target of 2.4 percent, which the EU commission rejected last month in an unprecedented move, saying it would make Italian debt unsustainable.

But slogans aside, he has also said the spending plans, which include tax cuts for small businesses and a hike in pensions and unemployment benefits, could be adjusted in future if Italian economic growth did not reach 1.5 percent next year - a figure which the EU commission believes to be too optimistic.

Midnight deadline

The noises from Rome come ahead of an EU deadline for Italy to submit a revised spending plan by midnight on Tuesday.

If the two sides cannot reach agreement, the EU commission could launch legal proceedings against Italy, leading, as a last resort, to fines worth billions of euros.

Di Maio, Salvini, and Italian prime minister Giuseppe Conte aim to meet on Tuesday to discuss their next move.

The fact that they did not invite Tria to their budget summit does not bode well.

But the tone from the EU side remained positive on Monday.

"The Italians are moving away not only from what they had promised us, but also from the minimum rules of the stability pact," Juncker told German broadcaster N-TV at an economic forum in Berlin, referring to an EU pact on fiscal rules.

'Moderate concern'

He added that he had only "moderate concerns" about the outcome of the dispute, however.

"Whoever has 130 percent of their economic performance as a public debt, must act more cautiously than someone who has sound finances," German finance minister Olaf Scholz also said, referring to Italy's debt pile, which is second only to that of Greece in the eurozone.

"I assume that the Italian government will make the necessary decisions that will make it possible that they will not get into trouble," he also added.

The EU budget clash with Italy comes in a difficult political context.

The EU fears that if it pushes Rome too hard it could lead to a backlash that would give more votes to the populist 5MS and League in next year's European Parliament election.

EU diplomats also fear that Italy might threaten to veto unrelated decisions, for instance, on the renewal of EU sanctions on Russia, unless the commission stands down.

Tuesday's deadline aside, the clash is likely to come to a head at the EU summit in Brussels next month.

But for their part, EU financial chiefs have said the politics of the situation were less important than the potential long-term damage to Italy that overspending might cause.

Long-term damage

"From previous experiences, we've seen that damage to the economy can be done quickly, but then it takes years to repair it," EU financial affairs commissioner Valdis Dombrovskis told Italian newspaper La Stampa over the weekend.

The market reaction to the populist budget had so far been muted, the deputy head of the European Central Bank, Luis de Guindos, said in Frankfurt on Monday.

But if things went badly, then Italian stocks and bonds could suffer, destabilising its banks, and creating a risk of contagion to other eurozone economies, he added.

"The strong market reactions to political events [in the past] have sparked new concerns about the link between banks and sovereign debt in some parts of Europe - this is the basis of the request for fiscal discipline and compliance with the rules," De Guindos said.

Agenda

EU elections and Italy's finances are in focus This WEEK

A debate among would-be EPP 'Spizenkandidat' candidates next week in Helsinki will be the first of many clashes of ideas ahead of European elections next May. The liberals are also holding their own congress.

EU commission rejects Italy's budget plans

The EU executive has asked Italy to resubmit its budget in an unprecedented rebuke, while warning Rome that public debt was the "enemy of the people".

Opinion

Austerity did not help Italy - maybe spending will?

Why all the fuss? You might not like their political views but let the Italian government implement some pro-growth reforms because austerity did not work in jumpstarting their economy.

Agenda

Brexit dominates EU affairs This WEEK

All eyes on London this week, where May struggles to hold onto power against Brexit rebels, while EU leaders meet in Brussels on Sunday to try to clinch agreement.

News in Brief

  1. Citizens' perception of judicial independence drops
  2. Irish finance minister voted in as eurogroup president
  3. Italy's League party opens office near old communist HQ
  4. 'Significant divergences' remain in Brexit talks
  5. Germany identifies 32,000 right-wing extremists
  6. WHO to hold probe of global Covid-19 response
  7. China accuses Australia of 'gross interference' on Hong Kong
  8. EU to let Croatia, Bulgaria take first step to join euro

EU forecasts deeper recession, amid recovery funds row

The economies of France, Italy and Spain will contract more then 10-percent this year, according to the latest forecast by the EU executive, as it urges member state governments to strike a deal on the budget and recovery package.

Stakeholders' Highlights

  1. UNESDANext generation Europe should be green and circular
  2. Nordic Council of MinistersNEW REPORT: Eight in ten people are concerned about climate change
  3. UNESDAHow reducing sugar and calories in soft drinks makes the healthier choice the easy choice
  4. Nordic Council of MinistersGreen energy to power Nordic start after Covid-19
  5. European Sustainable Energy WeekThis year’s EU Sustainable Energy Week (EUSEW) will be held digitally!
  6. Nordic Council of MinistersNordic states are fighting to protect gender equality during corona crisis

Latest News

  1. Michel lays out compromise budget plan for summit
  2. Border pre-screening centres part of new EU migration pact
  3. EU 'failed to protect bees and pollinators', report finds
  4. MEPs give green light to road transport sector reform
  5. If EU wants rule of law in China, it must help 'dissident' lawyers
  6. Five ideas to reshape 'Conference on Future of Europe'
  7. EU boosts pledges to relocate minors from Greece
  8. Hydrogen strategy criticised for relying on fossil fuel gas

Join EUobserver

Support quality EU news

Join us