Europe faces economic turmoil as Italy gets closer to the Excessive Debt Procedure

Participation of Jean-Claude Juncker, President of the EC, at the Informal meeting of heads of state or government.
Personalities: Jean-Claude Juncker , Giuseppe Conte. Date: 28/05/2019. Location: Brussels – Council/Europa. Photographer: Etienne Ansotte. © European Union, 2019. Source: EC – Audiovisual Service

Italy is in serious trouble as the EU deputy finance ministers seem to support the European Commission’s opinion on the actions required to reduce the country’s public debt. The huge growing debt together with the centre-right and euroskeptic alliance government is causing turbulences as regards its relations with Brussels.

However, the Italian coalition leaders have met on Monday evening and it was decided, according to the Prime Minister, to avoid entering the Excessive Debt procedure (EDP) that will be financially devastating for Belpaese. But are Matteo Salvini and Luigi Di Maio really determined to change the Italian fiscal policy and compromise with the EU to reduce Italy’s public debt?

EC’s report on Italy’s debt

The Italian public debt-to-GDP ratio was 132,2% in 2018 which is the second largest in the bloc and well above the 60% of GDP reference value of the Treaty on Stability, Coordination and Governance in the Economic and Monetary Union. The large debt is not decreasing and is projected to reach 133.7% in 2019 and 135.2% in 2020 based on both the government plans and the Commission’s spring forecast 2019 . The latter together with Italy’s slow progress on the 2018 Recommendations reveals that Italy is in a very critical situation and has no fiscal space to stabilise its economy which could lead to the EDP.

Will EDP be materialised?

The Excessive Debt Procedure is launched by the Council, based on recommendations by the Commission, once a country’s budget deficit exceeds 3% of gross domestic product (GDP) and public debt exceeds 60% of GDP. The executive body of the EU has warned Italy of taking disciplinary actions, such as the EDP, as this G7 country has breached EU’s debt rules and recommendations to reduce its public debt and cut its deficit. The European Commissioner Jean-Claude Juncker mentioned on the issue that “Italy was moving in an unsound direction and risked a procedure that could last years”.

The EDP is highly likely to be commenced despite the Italian Prime Minister’s attempts to persuade the leaders of League and Five Star Movement to change Italy’s policy and follow the EC’s recommendations on budget and debt. More specifically, Giuseppe Conte underlined two days ago that: “I will not be the first prime minister to bring Italy against the wall of the infringement procedure”.

Italy openly defies Brussels?

The populist government of Italy is set to provoke once more the Old Continent and the European Commission. Luigi Di Maio said yesterday on RTL radio that: “We are a founder nation of the European Union, we are on a level with Germany and France. We can demand more respect in Europe.” The Five Star leader also pointed out that no budget adjustment will be made in a compromise framework with the EC.

The leader of the right-wing party League added that: “We don’t need to ask Germans, Spanish and Luxembourgish for money. We want to use Italians’ money for Italians. Everything is fine at the top. Does the government go on? I never had doubts. The common objective is avoiding an infraction procedure by guaranteeing growth, the right to work and tax cuts. There won’t be any budget adjustment or tax increases.”

How Italy will meet the criteria of the Fiscal Stability Treaty without any modifications but instead with further tax cuts? It is very hard to believe that this government will compromise with the EC officials towards a viable solution without any disciplinary actions.

Will common sense ultimately prevail?

The Italian leaders are expected to meet again in the coming weeks to finalise the new programme. It is not the first time that Italy is facing the risk of EDP though. The second largest EU economy had failed to produce any results to reduce the country’s public debt in its draft budgetary plan for 2019 but managed to come to an agreement with the EC after altering its deficit figures.

Therefore, the need to decrease the large stock of public debt together with a revision of the spending expenditures seem mandatory in order not to enter a long-lasting procedure where corrective actions will take place to ensure its fiscal policy is conducted in a sustainable manner.

All in all, Italy is once more running out of time as the EU finance ministers will meet in Brussels on July 9th to decide on the formal opening of disciplinary proceedings. If the latter takes place, then the collision between Italy and Europe is expected to cause serious turbulences to the entire bloc as the contagion risks may be transmitted to the rest EU economies as well.

It is up to people such as Prime Minister Giuseppe Conte and Finance Minister Giovanni Tria to find the trade-off between Italy and Brussels that would make sure Italy is encouraged to keep its public debt under control and avoid possible sanctions and heavy fines.

Advertising

Advertising

Advertising

Advertising

Advertising

Advertising

the sting Milestone

Featured Stings

Can we feed everyone without unleashing disaster? Read on

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

EU Youth Conference in Amsterdam: enabling young people to engage in a diverse, connected and inclusive Europe

China is a renewable energy champion. But it’s time for a new approach

The four top Americans who flew to Europe perplexed things about Trump’s intentions

Wednesday’s Daily Brief: Guterres in Kenya, Prisoners sick in Iran, #GlobalGoals, Myanmar, Ukraine updates, and new space partnership

Iraqis paying an ‘unthinkable price’ to be heard, UN envoy tells politicians in Baghdad

From Russia with love: Brussels and Moscow close to an agreement on Ukraine’s gas supplies

Migration: Better travel safe than sorry

Myanmar military target civilians in deadly helicopter attack, UN rights office issues war crimes warning

European Youth Forum welcomes the European Commission’s proposed revision of the Union Code on Visas, however it does not go far enough

Innovation can transform the way we solve the world’s water challenges

Effective multilateralism the antidote to today’s ‘divisions’, Holy See tells UN Assembly

How building renovations can speed up the electric vehicle revolution

Online shopping across the EU to be easier from 3 December

Key economic forum in Russia: New technology a ‘vector of hope’ but also ‘a source of fear’ says Guterres

Canada has the most comprehensive and elaborate migration system, but some challenges remain

Nuclear non-proliferation treaty an ‘essential pillar’ of international peace, says UN chief

Food safety: more transparency, better risk prevention

Number of members in Parliament’s committees to change after Brexit

Worldwide UN family celebrates enduring universal values of human rights

UN chief hopeful for Libya, after Quartet meeting in Tunis

‘Dangerous nationalism’ seriously threatens efforts to tackle statelessness: UNHCR chief

Why do medical students need to go abroad to become a doctor in 2017?

State aid: France to recover €8.5 million of illegal aid to Ryanair at Montpellier airport

A Sting Exclusive: “Europe needs decisive progress for stronger cybersecurity”, EU Commissioner Gabriel highlights from Brussels

Facility for Refugees in Turkey: €127 million to boost EU’s largest ever humanitarian programme

Employment: Commission proposes €1.6 million from Globalisation Adjustment Fund to help 400 workers made redundant in Carrefour Belgique

Tiny Iceland teaches the West how to treat bankers

Yanis Varoufakis: “Unsustainable debt turns the creditor into Leviathan; Life under it is becoming nasty, brutish and short”

Following the World Cup? Then you’re watching high-performing migrants at work

EU cross-border payments outside Eurozone: MEPs scrap excessive fees

UN urges protection of indigenous peoples’ rights during migration

This incredibly detailed map of Africa could help aid and development

The movement of anti-vaccers: taking humanity back 200 years

The city of Quito just made commuting quicker and safer

Mind control using sound waves? We ask a scientist how it works

Tech companies are changing, for the better

MARKUP initiative to boost market access to Europe for East African SMEs

Tourism offers much to the EU gets a little

Why India can show us how to achieve growth with purpose

Gender equality in STEM is possible. These countries prove it

3 ways to use digital identity systems in global supply chains

Chinese economy to raise speed and help the world grow

How India is harnessing technology to lead the Fourth Industrial Revolution

After swallowing effortlessly the right to be forgotten time for Google Ads now to behave

EU Youth Conference in Riga concludes with recommendations for ministers

Ozone on track to heal completely in our lifetime, UN environment agency declares on World Day.

With half of Somaliland children not in school, UNICEF and partners launch education access programme

Security Council calls for dialogue in Haiti

Spain will soon overtake Japan in life expectancy rankings. Here’s why

Thursday’s Daily Brief: Press Freedom Day, Tuna Day, cultural dialogue, #GlobalGoals awards, updates on Syria, Somalia, Mali

The Irish Presidency bullies the Parliament over EU budget

Multilateralism must weather ‘challenges of today and tomorrow’ Guterres tells Paris Peace Forum

Friday’s Daily Brief: human rights in Sudan, sombre anniversaries for Rwanda and Nigeria, and fears of ‘chaos’ in Libya

European Youth Forum demands immediate action & binding agreement on climate change

Economic sentiment and business climate stagnate in miserable euro area

Climate change recognized as ‘threat multiplier’, UN Security Council debates its impact on peace

Easier Schengen Visas for non-EU holiday makers: A crucial issue for south Eurozone countries

Here’s how to rebut the climate doom-mongers

Backed by UN, Asia-Pacific countries to advance space technology for ‘development transformation’

Rural women a ‘powerful force’ for global climate action: UN Secretary-General

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