Friday

3rd Feb 2023

Brussels calls on Italy to cut deficit by 2007

The European Commission on Wednesday (29 June) formally asked the Italian government to take measures to get back in line with eurozone rules.

Rome was called on to push its public spending deficit under the three percent of GDP ceiling by the end of 2007, and present a plan to Brussels by November on how it will achieve it.

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

According to the commission's data, Italy's deficit stood at 3.2 percent of GDP in the two preceding years, and it is projected to reach 3.6 percent this year and 4.6 percent of GDP in 2006.

Silvio Berlusconi's government has also been asked to cut down its long-term public debt that currently stands at 106 percent of GDP - the second biggest after Greece - compared to the 60 percent eurozone limit.

The timetable proposed by the commission makes it possible for Mr Berlusconi to avoid unpopular spending cuts before next year's general elections, although "at least half of the correction should take place by 2006".

Finance ministers are expected to hammer out final details of the commission's proposal at a meeting on 12 July.

Monetary affairs commissioner Joaquin Almunia admitted the whole procedure was going to be an "important test" of the new stability and growth pact as Italy is first key case evaluated under the rules as revised in March.

"We are all interested in increasing fiscal discipline, particularly in the moments we are living," he said, pointing to the political crisis in Europe due to the failed referendums on the EU constitution, as well as the gloomy economic situation in the union.

Two years instead of one

Both the old and revised eurozone rules suggest that countries with excessive deficits should get them back on track after one year, unless there are "special circumstances", recognised by the EU executive.

That has not been so in Italy's case. But Mr Almunia suggested that while "rapid correction" of its budgetary situation is necessary, 2007 is a "more appropriate deadline" because of the country's weak economy and the great structural changes needed.

The EU executive will later assess the measures proposed by the government and say if they are efficient. Rome is required to cut its structural deficit by at least 1.6 percent of GDP over 2006 and 2007.

According to the Italian economy minister Domenico Siniscalco, the commission's proposal is "balanced" and will be accompanied on the Italian side by a 2006 budget "aimed at economic growth in a framework of stability", he said in a statement.

The new four-year budgetary plan will be presented at the Italian cabinet's meeting on Friday.

Mr Berlusconi announced today that the 2006 budget will include net deficit-cutting measures worth around €10 billion, but no "mini-budget" for this year with more cuts is expected, according to wires.

Some economists are pessimistic about the effectiveness of the whole procedure.

"It's going to be mostly a lot of talk at this point, but little truly efficient action on both sides", Daniel Gross, director of the Brussels-based Centre for European Policy Studies told EUobserver.

"It will just go on the way it used to be. A country finds itself in deficit, then gets two years to repair its problem but then in some time gets it back to the same level", he said, adding he did not expect the current Italian cabinet to really change anything or implement stricter measures given its political priorities before the elections.

Italy is one of ten other EU countries with excessive deficits, joined by France, Germany, Greece, the Czech Republic, Cyprus, Hungary, Malta, Poland and Slovakia.

Hawkish ECB rate-rise 'puts energy transition at risk'

The European Central Bank raised interest rates by another 0.5 percent to a 14-year high, and expects to hike rates by another half percent in March. But what does that mean for the green transition?

Polish backpedal on windfarms put EU funds at risk

Draft legislation in Poland aimed at relaxing some of Europe's strictest laws surrounding onshore wind-turbines has been derailed by a surprise last minute amendment, which could put Poland back on a collision course with the EU.

Opinion

More money, more problems in EU answer to US green subsidies

Industrial energy-intense sectors, outside Germany and France, will not move to the US. They will go bust, as they cannot compete in a fragmented single market. So to save industry in two member states, we will kill the rest?

Latest News

  1. MEPs launch anonymous drop-box for shady lobbying secrets
  2. Hawkish ECB rate-rise 'puts energy transition at risk'
  3. MEPs push for greater powers for workers' councils
  4. How Pavel won big as new Czech president — and why it matters
  5. French official to take on Islamophobia in EU
  6. EU green industry plan could spark 'dangerous subsidy race'
  7. Wolves should be defended, EU ministers urge
  8. EU Commission wants drones for Bulgaria on Turkey border

Stakeholders' Highlights

  1. Party of the European LeftJOB ALERT - Seeking a Communications Manager (FT) for our Brussels office!
  2. European Parliamentary Forum for Sexual & Reproductive Rights (EPF)Launch of the EPF Contraception Policy Atlas Europe 2023. 8th February. Register now.
  3. Europan Patent OfficeHydrogen patents for a clean energy future: A global trend analysis of innovation along hydrogen value chains
  4. Forum EuropeConnecting the World from the Skies calls for global cooperation in NTN rollout
  5. EFBWWCouncil issues disappointing position ignoring the threats posed by asbestos
  6. Nordic Council of MinistersLarge Nordic youth delegation at COP15 biodiversity summit in Montreal

Stakeholders' Highlights

  1. Nordic Council of MinistersCOP27: Food systems transformation for climate action
  2. Nordic Council of MinistersThe Nordic Region and the African Union urge the COP27 to talk about gender equality
  3. Friedrich Naumann Foundation European DialogueGender x Geopolitics: Shaping an Inclusive Foreign Security Policy for Europe
  4. Obama FoundationThe Obama Foundation Opens Applications for its Leaders Program in Europe
  5. EFBWW – EFBH – FETBBA lot more needs to be done to better protect construction workers from asbestos
  6. European Committee of the RegionsRe-Watch EURegions Week 2022

Join EUobserver

Support quality EU news

Join us