Wednesday

7th Dec 2022

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.

ECB says more rate hikes to come

European Central Bank president Christine Lagarde said more rate hikes will come, but also admitted a recession will not lower inflation — leaving some economist question the logic of the policy.

Stakeholders' Highlights

  1. Nordic Council of MinistersLarge Nordic youth delegation at COP15 biodiversity summit in Montreal
  2. Nordic Council of MinistersCOP27: Food systems transformation for climate action
  3. Nordic Council of MinistersThe Nordic Region and the African Union urge the COP27 to talk about gender equality
  4. International Sustainable Finance CentreJoin CEE Sustainable Finance Summit, 15 – 19 May 2023, high-level event for finance & business
  5. Friedrich Naumann Foundation European DialogueGender x Geopolitics: Shaping an Inclusive Foreign Security Policy for Europe
  6. Obama FoundationThe Obama Foundation Opens Applications for its Leaders Program in Europe

Latest News

  1. EU delays Hungary funds decision, as Budapest vetoes Ukraine aid
  2. Borrell gets pension from MEP fund set for taxpayer bailout
  3. Autocrats make us all less secure
  4. Big Agri's lies: green EU farming not to blame for food insecurity
  5. German top court declares €800bn EU recovery fund 'legal'
  6. EU countries struggle to crack Hungary's vetos
  7. Frontex expanding migrant route-busting mission in Balkans
  8. EU ministers in fresh battle on joint debt, after Biden subsidies

Stakeholders' Highlights

  1. EFBWW – EFBH – FETBBA lot more needs to be done to better protect construction workers from asbestos
  2. European Committee of the RegionsRe-Watch EURegions Week 2022
  3. UNESDA - Soft Drinks EuropeCall for EU action – SMEs in the beverage industry call for fairer access to recycled material
  4. Nordic Council of MinistersNordic prime ministers: “We will deepen co-operation on defence”
  5. EFBWW – EFBH – FETBBConstruction workers can check wages and working conditions in 36 countries
  6. Nordic Council of MinistersNordic and Canadian ministers join forces to combat harmful content online

Join EUobserver

Support quality EU news

Join us