Sunday

28th Aug 2016

Italy and France on EU's economic 'watch list'

  • Italy and France are under pressure from Brussels to cut debt and deficit levels

Italy and France were the major euro area countries put on the European Commission's economic "watch-list" over fears about persistently high debt and deficit levels.

The two countries were among 14 nations deemed to have "macro-economic imbalances" in their economy by the EU executive in a series of reports on 17 countries published on Wednesday (5 March).

Dear EUobserver reader

Subscribe now for unrestricted access to EUobserver.

Sign up for 30 days' free trial, no obligation. Full subscription only 15 € / month or 150 € / year.

  1. Unlimited access on desktop and mobile
  2. All premium articles, analysis, commentary and investigations
  3. EUobserver archives

EUobserver is the only independent news media covering EU affairs in Brussels and all 28 member states.

♡ We value your support.

If you already have an account click here to login.

Italy "must address its very high level of public debt and weak external competitiveness," the commission said, adding that its economy is hamstrung by "a continued misalignment between wages and productivity, a high labour tax wedge, an unfavourable export product structure and a high share of small firms which find it difficult to compete internationally."

Speaking with reporters on Wednesday, the bloc's economic affairs commissioner Olli Rehn also called for a fresh effort from Italy's new Prime Minister Matteo Renzi, saying that Italy needs to reach and maintain budget surpluses "above historical averages", make further cuts to public spending and achieve economic growth.

Italy has had a debt pile of around 100 percent of GDP for most of the past 20 years, but the burden hit 130 percent in 2013, the second highest in the bloc behind Greece, as its economy shrank for the second successive year.

Meanwhile, the commission warned that France would miss its target to reduce its budget deficit to 3 percent - the limit set out in the EU's stability pact - despite being given an extra two years to do so.

Both Italy and France will now be subject to strict monitoring programmes by the commission.

Croatia and Slovenia were urged to impose austerity programmes to correct excessive imbalances, with the commission stating that Croatia, which became the latest member of the EU last summer, was "experiencing a prolonged bust".

The reports form part of the EU's overhauled economic governance framework under which countries must take actions to cut debt and deficit levels and economic imbalances or face a possible fine.

On the other hand, Germany was encouraged to increase domestic spending, which the Commission said would "boost potential growth, and could contribute to the recovery and to the ongoing adjustment in the euro area."

"I wish every eurozone member state had same export competitiveness as Germany," said Rehn, "but we recommend strengthening domestic investment."

However, Spain was praised for its recent economic recovery which the commission described as being "clearly advanced"

"The current account has turned into surplus, as a result of a combination of import compression and strong exports, supported by competitiveness gains. The housing market has approached stabilisation. Employment destruction appears to be coming to an end," it said.

Italy earthquake is test for Renzi

Italian prime minister is expected to present a quick reconstruction plan and request more budget flexibility from the EU after this week's tragic earthquake.

News in Brief

  1. Hungary plans to reinforce border fence against migrants
  2. France's highest court suspends burkini ban
  3. Greeks paid €1bn more in taxes in June
  4. Greek minister denounces EU letter on former statistics chief
  5. Turks seeking asylum in Greece may cause diplomatic row
  6. Merkel becomes digital resident of Estonia
  7. Report: VW will compensate US dealers with €1bln
  8. EU mulls making Google pay news media for content

Stakeholders' Highlights

  1. GoogleBrussels - home of beer, fries, chocolate and Google’s Public Policy Team - follow @GoogleBrussels
  2. HuaweiSeeds for the Future Programme to Bring Students from 50 countries to China for Much-Needed ICT Training
  3. EFASpain is not a democratic state. EFA expresses its solidarity to Arnaldo Otegi and EH Bildu
  4. UNICEFBoko Haram Violence in Lake Chad Region Leaves Children Displaced and Trapped
  5. HuaweiMaking Cities Smarter and Safer
  6. GoogleHow Google Makes Connections More Secure For Users
  7. EGBAThe EU Court of Justice Confirms the Application of Proportionality in Assessing Gambling Laws
  8. World VisionThe EU and Member States Must Not Use Overseas Aid for Promoting EU Interests
  9. Dialogue PlatformInterview: "There is a witch hunt against the Gulen Movement in Turkey"
  10. ACCAACCA Calls for ‘Future Looking’ Integrated Reporting Culture With IIRC and IAAER
  11. EURidNominate Your Favourite .eu or .ею Website for the .EU Web Awards 2016 Today!
  12. Dialogue PlatformAn Interview on Gulen Movement & Recent Coup Attempt in Turkey