Italy’s revised budget remains roughly unchanged waiting for Europe’s fury

Jean-Claude Juncker, President of the EC, participates in the European Council taking place on 17 and 18 October 2018 in Brussels.
Date: 18/10/2018. Location: Brussels,Belgium.
© European Union , 2018. Photo: Etienne Ansotte

The Italian government concluded its revised budget a few hours ago and as expected the Italian budget plan remained the same with small amendments, such as plans to sell off some government real estate, but still is not respecting the EU fiscal rules. The latter is most likely not going to be left unanswered by the European Commission which might impose billions of financial sanctions against Italy and initiate the “Excessive Deficit Procedure” (EDP).

According to the International Monetary Fund (IMF), Italy’s deficit is rising in slower than the EC expects pace and leads the country into a recession. The third largest EU economy should avoid widening its deficits but target more on structural reforms, the IMF Europe Director Paul Thomsen said last week. The same stance was taken by the European Finance Ministers during last week’s Eurogroup meeting where it was stated that Italy has to change its position and comply with the EU budget rules; something that of course didn’t affect neither the Prime Minister Giuseppe Conte nor the two deputy prime ministers, Matteo Salvini and Luigi Di Maio.

However, the entire EU edifice is highly connected to the Italian economy and both are expected to be shaken to their foundations. Thus, it is very crucial that the EC‘s position on this matter to be extremely meticulous.

IMF warns about Italy

IMF has released its concluding statement about the Italian economy yesterday reporting that Italy has low growth and weak social results. The main drawbacks of the economy are concluded to be its unemployment rate, the living standards of middle-aged and younger generations and the real personal income.

Based on the above, the IMF proposes “a package of structural reforms, fiscal consolidation based on high-quality measures, and bank balance sheet strengthening”. As top priority is considered to be the implementation of structural reforms which can increase productivity. Furthermore, the fiscal policy needs to be modified towards growth and debt-to-GDP ratio should be lowered down dramatically as it is the second highest in the euro area.

Last but not least, the International Monetary fund ends up that if those suggestions are not implemented, then the Italian economy will be left very susceptible.

Italy defies Europe

The populist government of Italy is set to provoke once more the executive EU body. The revised budgetary plan which was confirmed late last night, just before the midnight deadline that was set by the EC, is basically validating the intentions of the Italian government and goes against the EU fiscal rules of the Stability and Growth Pact which implies that all EU member states have to follow a fiscal policy to stay within the limits on government GDP deficit of 3% and debt to GDP ratio of 60%.

The Italian coalition government seems ready to fulfil election campaign promises at all costs. Italian officials have repeatedly mentioned that would “respond to the needs of the Italian people” and follow their policy programme which includes a universal basic income, tax cuts and lowering the retirement age. The latter is going to be achieved through a 2,4% deficit target and a 1,5% growth forecast for next year according to the letter of reply to the EC. As Deputy Prime Minister Matteo Salvini said yesterday: “The Italian government will maintain its deficit and economic growth forecasts for 2019 despite European Commission demands for the budget plan to be revised”.

EU response

It is the Commission’s turn now to respond to the Italian revised budgetary plan. Since Italy didn’t comply with EC’s recommendation to lower its budget deficit and based on the fact that the EC will reject the budget again, the EC is likely to commence the EDP in order for Italy to get its budget deficit under control. This action can take place from November 21 till December 6. Italy will have six months to comply once the procedure begins. But the government would risk a fine of 0,2% of Italy’s annual GDP of 1.7 trillion euros in case of continuously failing to comply.

However, the collision between Italy and Europe is expected to cause serious consequences to the whole bloc. It has already increase to a great extent the Italian borrowing costs and the contagion risks could be transmitted to the rest EU economies very soon.

EU officials are well aware though that a very careful planning of the situation is needed in order not to create irreversible turbulences to the Old Continent’s economy. Besides, the European Central Bank has many monetary tools in its arsenal that could be used in such conditions.

But as Italy seems extremely unpredictable, everything is on the table.

Advertising

Advertising

Advertising

Advertising

Advertising

Advertising

Advertising

Advertising

Advertising

Advertising

Advertising

Advertising

Advertising

the European Sting Milestones

Featured Stings

These campaigners want to give a quarter of the UK back to nature

How to build a more resilient and inclusive global system

Stopping antimicrobial resistance would cost just USD 2 per person a year

Chart of the day: This is how many animals we eat each year

4 ways blockchain will transform the mining and metals industry

Ecofin: ‘The Friday battle’ for the banking union

Globalization 4.0 means harnessing the power of the group

Idai disaster: Stranded victims still need rescue from heavy rains as UN scales up response

Relieving the suffering of dying: Home Palliative Care as a spiritual coping strategy

UN chief welcomes establishment of inclusive government in Central African Republic

These companies can recycle nearly anything, from cigarette butts to fax machines

How China’s sponge cities are preparing for sea-level rise

10 months were not enough for the EU to save the environment but 2 days are

AI could be a silver bullet for healthcare in ASEAN

‘Everyone must be on board’ for peace in Central African Republic: UN’s Lacroix

Lagarde: Keep feeding the banks cut down wages and food subsidies

‘Negative forces’ at work in DR Congo threaten ‘largely peaceful’ relations across Great Lakes region, says outgoing UN envoy

Human rights champions from across the world receive top UN prize

UN chief highlights action across borders for ‘stable and prosperous Eurasia’

Importance of teaching ethics in Brazilian Medical Schools

Nearly a third of the globe is now on Facebook – chart of the day

Instability in Africa’s Sahel, spreading outwards, Security Council told

Trump fines China with $50 billion a year plus some more…

Innovating together: connectivity that matters at ITU Telecom World 2019 – in association with The European Sting

Benefits of rural migration effect often overlooked, new UN report suggests

Hydrogen power is here to stay. How do we convince the public that it’s safe?

rescEU: EU establishes initial firefighting fleet for next forest fire season

Marriage equality boosted employment of both partners in US gay and lesbian couples

Mosul’s ‘3D contamination’ adds to challenges of deadly mine clearance work

‘Once lost, hearing doesn’t come back,’ World Health Organization warns on World Hearing Day

UN Security Council welcomes results of Mali’s presidential elections

We need a global convention to end workplace sexual harassment

MWC 2016 LIVE: Ingenu steps up efforts to build LPWA networks across the globe

Financial services: Commission sets out its equivalence policy with non-EU countries

Why a multi-stakeholder approach is essential to our risk resiliency

Further reforms will move Slovakia toward a more innovative and inclusive society

Human rights chief calls for international probe on Venezuela, following ‘shocking accounts of extrajudicial killings’

Three myths keeping government procurement stuck in the past

We need new tools for the Big Data era

This AI-powered app aims to help people with autism improve their social skills

Draghi to lay his print on long term ECB policies prior to exiting next year

These are America’s most dangerous jobs

Now doctors can manipulate genetics to modify babies, is it ethical?

Informal meeting of heads of state or government, Sibiu, 09/05/2019

On World Bee day, human activity blamed for falling pollinator numbers

Why Italy will not follow the Greek road; Eurozone to change or unravel

Central African Republic militia leader and football executive, transferred to ICC

Brexit: the time has come for the UK to clarify its position

We need a reskilling revolution. Here’s how to make it happen

Why Renewable Energy is an attractive investment

Britain aligns with EU rivaling US on trade and Iran, abandons bilateral ‘Midsummer Night’s Dream’

Migration and the climate crisis: the UN’s search for solutions

How will the EU face the migration crisis when the Turkish threats come true?

UN boosts humanitarian appeal to help tackle Zimbabwe’s ‘worst-ever’ hunger crisis

UN’s AIDS agency ‘greatly encouraged’ by latest scientific breakthrough showing cure is possible

How Japan became the world leader in floating solar power

I have a rare disease. This is my hope for the future of medicine

ECB bets billions on Eurozone’s economic recovery

Global economy to see ‘steady’ growth of three per cent in 2019 despite risks, says UN

More women and girls needed in the sciences to solve world’s biggest challenges

Guterres censures terrorist attacks in Nigeria, pledges UN ‘solidarity’

Torture is unacceptable and unjustified ‘at all times’ underscore top UN officials

European Elections: “Web giants” are urging users to vote

More Stings?

Speak your Mind Here

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s