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.

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

A Europe that Protects: Commission calls for decisive action on security priorities

How the diaspora is helping Venezuela’s migration crisis

GSMA Mobile 360 Series – Latin America, in association with The European Sting

1 million citizens try to create a new EU institution

Can free trade deliver cheaper renewable energy? Ask Mexico

On the first day of 2019, over 395,000 babies to be born worldwide: UNICEF

Qualcomm to be the next target of EU antitrust regulators? China might be the answer

Scoring for the environment: what Mathieu Flamini’s top-flight football career taught him about leadership

CEOs in these countries are more likely to go with their gut

Pandemic mental health: the urgency of self-care

Financing fossil fuels risks a repeat of the 2008 crash. Here’s why

Changing how we produce and consume: New Circular Economy Action Plan shows the way to a climate-neutral, competitive economy of empowered consumers

Your smartphone may know more about your mental health than you

Future Forces Forum: Prague will be hosting the most important project in the field of Defence and Security

Gig workers among the hardest hit by coronavirus pandemic

EU budget: Reinforcing Europe’s cultural and creative sectors

Stepped-up efforts needed to combat pneumonia; save nearly nine million children’s lives

COVID-19: What to know about the coronavirus pandemic on 6 April

Brexit and migration dominates the debate on October’s EU summit

EU-Turkey relations: Will Turkey manage to revive the EU accession process talks?

European Semester Autumn Package: Creating an economy that works for people and the planet

Burundi: Inclusive dialogue ‘only viable option’ for resolving country’s political crisis says, UN envoy

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

Africa-Europe Alliance: first projects kicked off just three months after launch

Here are 4 of the most politically charged World Cup games ever played

This chart shows the total number of COVID-19 cases and recoveries so far

Supporting the recovery: MEPs adopt budget priorities for 2021

This is how the Western Balkans will become more innovative

EU out to conquer African Union summit

Nearly half a billion people can’t find decent work; unemployment set to rise: new UN labour report

With potential to boost profits by up to 20 per cent, a woman’s place is at work, says UN labour agency

Junior Enterprises as a solution for Youth Entrepreneurship

Spring 2019 Economic Forecast: Growth continues at a more moderate pace

UN chief condemns suspected Boko Haram attacks targeting Eid al-Fitr celebrations in Nigeria

IMF: The near-term outlook for the U.S. economy is one of strong growth and job creation

Capital Markets Union: Making it easier for insurers to invest in the real economy

Germany loves a strong euro; the new Fiscal Councils can deliver despite the Greek chaos and a wider questioning of austerity

Can Greece’s devastating economy deal with the migration crisis?

Do men and women really have different leadership styles?

We can build a carbon-neutral world by 2050. Here’s how

New identity cards deliver recognition and protection for Rohingya refugees in Bangladesh

Indonesian tsunami death toll climbs over 400 as Government-led relief efforts are stepped up

These 11 EU states already meet their 2020 renewable energy targets

International Court of Justice orders Pakistan to review death penalty for Indian accused of spying

Mother of all mergers between Facebook Messenger, WhatsApp and Instagram: EU Data Privacy restrictions against Facebook’s imperialistic plans

Antibiotics are contaminating the world’s rivers

New ECB boss quizzed for the first time by Economic Affairs Committee

MEPs back update of rail passenger rights across EU

Batteries included: how better storage can transform renewable energy

Venezuelan crisis: MEPs reaffirm their support for Juan Guaidó

‘Reasons to hope’ for sustainable peace in Central African Republic – UN Mission chief

Four million Syrian children have only known war since birth: UNICEF

Germany fears that Americans and Russians want to partition Europe again

Radio still a powerful worldwide tool for ‘dialogue, tolerance and peace’: Guterres

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

Stronger partnerships with post-conflict countries needed to ensure ‘path towards durable peace’: UN chief

I accidentally went viral on TikTok. I learned we failed our youngest generation.

Code of Practice against disinformation: Commission calls on signatories to intensify their efforts

To retire at 65, American millennials need to save almost half their paycheck

New EU rules cut red tape for citizens living or working in another Member State as of tomorrow

More Stings?

Advertising

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