Sunday

3rd Jul 2022

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

Become an expert on Europe

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

... or subscribe 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.

EU commission puts Italy on spot over growing debt

The EU's debt-criteria rules are in breach by Italy, the commission reiterated on Wednesday - in a decision that could pave the way for sanctions for Rome if member states agree.

Opinion

Italy will keep blinking in 2019

Italy's 'marriage of convenience' coalition government likes picking battles with Brussels. But with the economy now in recession, and deputy prime minister Matteo Salvini needing to keep the business lobby on board, expect Rome to blink first.

News in Brief

  1. EU Parliament 'photographs protesting interpreters'
  2. Poland still failing to meet EU judicial criteria
  3. Report: Polish president fishing for UN job
  4. Auditors raise alarm on EU Commission use of consultants
  5. Kaliningrad talks needed with Russia, says Polish PM
  6. Report: EU to curb state-backed foreign takeovers
  7. EU announces trade deal with New Zealand
  8. Russia threatens Norway over goods transit

Stakeholders' Highlights

  1. Nordic Council of MinistersNordic and Canadian ministers join forces to combat harmful content online
  2. Nordic Council of MinistersNordic ministers write to EU about new food labelling
  3. Nordic Council of MinistersEmerging journalists from the Nordics and Canada report the facts of the climate crisis
  4. Council of the EUEU: new rules on corporate sustainability reporting
  5. Nordic Council of MinistersNordic ministers for culture: Protect Ukraine’s cultural heritage!
  6. Reuters InstituteDigital News Report 2022

Latest News

  1. Nato's Madrid summit — key takeaways
  2. Czech presidency to fortify EU embrace of Ukraine
  3. Covid-profiting super rich should fight hunger, says UN food chief
  4. EU pollution and cancer — it doesn't have to be this way
  5. Israel smeared Palestinian activists, EU admits
  6. MEPs boycott awards over controversial sponsorship
  7. If Russia collapses — which states will break away?
  8. EU Parliament interpreters stage strike

Join EUobserver

Support quality EU news

Join us