Monday

17th Dec 2018

EU commission warns Italy on budget, moves towards fines

  • Italy can come this far - commissioner Pierre Moscovici at the press conference (Photo: European Commission)

The EU Commission proposed on Wednesday (21 November) to put Italy under an economic disciplinary program after it said Rome's revised budgetary plans were in serious breach of EU rules.

The EU executive, after reviewing all 28 EU member states' budgetary plans, said it retains its earlier concerns about Italy's populist-coalition government's plans to boost spending.

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

"Our opinion on Italy's revised draft budgetary plan confirms our initial assessment that it is in particularly serious non-compliance with the EU council's recommendation to Italy, which the government itself signed up to last July," finance commissioner Pierre Moscovici told reporters on Wednesday.

The commission had already rejected the first version of Italy's budget plan. Its new plan, which has not made significant changes, aims to increase the country's deficit to 2.4 percent of GDP in 2019.

The commission is worried that an increased deficit will make Italy's economy even more vulnerable, as its public deficit currently stands at 131 percent of GDP, the second largest in the EU, and twice the amount prescribed as a reference value by EU rules.

The EU is concerned that if the eurozone's third-largest economy cannot manage its debt, the entire eurozone will be in trouble - only a few years after the bloc has emerged from the euro-debt crisis.

The commission therefore called for a debt-based "excessive deficit procedure", an economic surveillance and disciplinary program for those EU countries that are over-spending.

Valdis Dombrovskis, commission vice-president for the euro, warned Italy risks uncertainty, which would increase lending cost for Italians, and in the end could lead to austerity.

'Sleepwalking into instability'

"We see a risk of the country sleepwalking into instability," Dombrovskis warned.

EU countries now have two weeks to decide if they agree that the launch of the procedure against Italy is warranted. Moscovici said he expected member states to agree with the commission.

Euro finance ministers then in January can officially declare Italy's deficit 'excessive', and adopt the commission's recommendations: asking Italy to amend its budget, reduce spending and borrowing, within three to six months.

Only if Rome then fails to comply can the commission - for the first time - apply financial sanctions, which can amount to fines up to 0.2 percent of GDP, plus the suspension of some EU funds.

Italy's coalition of populists and far-right parties sounded defiant on Wednesday.

Prime minister Giuseppe Conte said on Wednesday said that the budget plan is "excellent".

Conte said he would hold talks with European Commission president Jean-Claude Juncker on Saturday (24 November) and try to explain the budget further.

The commission was keen not to escalate tensions with Italy over the budget, with Moscovici stressing that Wednesday's announcement does not mean the launch of the procedure yet.

Brussels has already had several run-ins with Rome's new rulers, as League party leader and deputy prime minister, Matteo Salvini, has taken potshots at the mainstream "elite" of the EU, hoping to score big at next May's European elections.

The EU had also hoped that a nervous market reaction would force Italy to rethink its budget plan - but the markets have reacted to the commission news on Wednesday calmly.

Italy defiant on budget on eve of EU deadline

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.

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.

Opinion

Fiscal discipline rules in eurozone are devastating

New rules are needed that do not place the heaviest burdens on a few countries, but ensure that all countries benefit from the euro. Avoiding imbalances in trade between countries can do this.

Greens boycott EU-Morocco vote after lobbying expose

EUobserver has exposed Moroccan lobbying at the European Parliament, prompting a probe to be launched against several MEPs. The Greens have now decided to boycott next week's Morocco trade vote in protest, saying the lobbying investigation must be finished first.

Stakeholders' Highlights

  1. International Partnership For Human RightsKyrgyz authorities have to immediately release human rights defender Azimjon Askarov
  2. Nordic Council of MinistersSeminar on disability and user involvement
  3. Nordic Council of MinistersInternational appetite for Nordic food policies
  4. Nordic Council of MinistersNew Nordic Innovation House in Hong Kong
  5. Nordic Council of MinistersNordic Region has chance to become world leader when it comes to start-ups
  6. Nordic Council of MinistersTheresa May: “We will not be turning our backs on the Nordic region”
  7. International Partnership for Human RightsOpen letter to Emmanuel Macron ahead of Uzbek president's visit
  8. International Partnership for Human RightsRaising key human rights concerns during visit of Turkmenistan's foreign minister
  9. Nordic Council of MinistersState of the Nordic Region presented in Brussels
  10. Nordic Council of MinistersThe vital bioeconomy. New issue of “Sustainable Growth the Nordic Way” out now
  11. Nordic Council of MinistersThe Nordic gender effect goes international
  12. Nordic Council of MinistersPaula Lehtomaki from Finland elected as the Council's first female Secretary General

Latest News

  1. Fiscal discipline rules in eurozone are devastating
  2. EU capitals see weekend of tear gas and water cannon
  3. Bulgarian 'EU passports' whistleblower wants justice
  4. No more Brexit talks, despite May's pleas
  5. EU leaders stuck on asylum reform
  6. Orban and other PMs spread fake news, says Juncker
  7. Fishing quota and no-deal Brexit preparation This WEEK
  8. Kosovo has right to own army, Germany and US say

Join EUobserver

Support quality EU news

Join us