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

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

Measles cases nearly doubled in a year, UN health agency projects

What people want – ignore at your peril

Monday’s Daily Brief: biodiversity and forests, labour and road safety, women’s rights, and fallen UN staff remembered

‘Antagonistic gestures and accusations’ drown out Kosovo dialogue hopes, Security Council hears

Don’t dismiss start-ups founded by millennials. This is how they succeed

Is Europe ready to cooperate with the rest of the world? Can Germany change its selfish policies?

Will the outcome of the UK referendum “calm” the financial markets?

Japan should reform retirement policies to meet challenge of ageing workforce

Italy’s Letta: A European Banking Union soon or Eurozone collapses

G20 LIVE: “ISIL is the face of evil; our goal is to degrade and ultimately destroy this barbaric terrorist organisation”, US President Barack Obama cries out from Antalya Turkey

Tackling water scarcity: 4 ways to pull H20 out of thin air

EU Parliament: Deposit guarantee and trading platform transparency sought

Here are five tips to make your message clear in a crowded world

Draghi hands over to banks €77.7 billion more

FROM THE FIELD: ‘Harvested’ rainwater saves Tanzanian students from stomach ulcers, typhoid

Everything you need to know about water

Progress made in UN talks to end Yemen war, Envoy lauds ‘positive and serious spirit’

How has tech been used for good in civil society? We asked the experts

How energy infrastructure is shaping geopolitics in East Asia

UN chief urges top digital tech panel to come up with ‘bold, innovative ideas’ for an ‘inclusive’ future

Brexit: MEPs concerned over reported UK registration plans for EU27 citizens

WEF Davos 2016 LIVE: “We need more Schengen but reinforce control!”, France’s Minister of Economy Emmanuel Macron emphasises from Davos

Despite violence, ‘tremendous hunger’ for peace in Afghanistan: top UN official

IMF: How can Eurozone avoid stagnation

‘Crimes against humanity,’ ‘war crimes’ and risk of new ethnic violence in DR Congo, warn UN experts

Eurozone: Despite anemic growth and shaky banks marks record trade surplus

The COP24 Agreement: Yes, it happened at last

Making the most of the Sustainable Development Goal 3: its overlooked role in medical education

UN rights experts call on Philippines Government to halt ‘unacceptable attacks’ on Victoria Tauli-Corpuz

Libya: Thousands seek shelter in health clinics from Tripoli fighting, UN warns

EU growth in 2015 to be again sluggish; Can the Juncker Commission fight this out?

We have to fight for a fairer tech industry for women

Global Leaders Take The Stage At MWC Shanghai 2019, in association with The European Sting

In Tanzania visit, UNHCR official stresses freedom of choice is crucial for refugee returns

Two peacekeepers killed in an attack against UN convoy in Mali

Italian voters put again the European Peoples in the Brussels picture

Commission to decide definitely on genetically modified Maize 1507 seed

How will EU look after French, Dutch and German Elections and what will be the implications for Youth Entrepreneurship?

Superbugs: MEPs advocate further measures to curb use of antimicrobials

2 trillion drinks containers are made every year – so where do they go?

European Youth Forum welcomes establishment of new Youth Intergroup in the European Parliament

How Finland is fighting fake news – in the classroom

Dramatic funding shortages a ‘severe catastrophe’ for people of Gaza: UN Coordinator

The impossible end of the war in Syria

China’s Ambassador to the EU Zhang Ming wishes to Brussels a Happy 2019 Year of the Pig

Eurozone: Inflation plunge to 0.4% in July may trigger cataclysmic developments

ECB: Euro area should smooth out the consumption and income shocks of its members

Big world banks to pay $ 4.95bn for cheating customers; Is it a punishment or a gentle caress?

Who the US and China have trade disputes with

There is a way for Eurozone to reach a sustainable growth path

Children are still dying in Yemen war, despite partial ceasefire, says UNICEF chief

From Shadows to Sunlight, Paraguay’s Road to Transparency

Gig economy: Employment Committee MEPs want to boost workers’ rights

MEP Cristiana Muscardini @ European Business Summit 2014: International Trade in Europe

A Sting Exclusive: Towards better business opportunities for the EU and its neighbours, Commissioner Hahn live from European Business Summit 2015

The ECB accuses the politicians of inaction, continues injecting billions to banks

The European Commission, European Investment Bank and Breakthrough Energy Ventures establish a new €100 million fund to support clean energy investments

The UN supports Europe’s military action in Libya and the Mediterranean; Russia and China agree

UN rights chief says ‘bar must be set very high’ for investigation of murdered Saudi journalist

The ECB again takes care of the bankers not the people

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