Commission concludes that an Excessive Deficit Procedure is no longer warranted for Italy at this stage

Tirana 19.jpg

From left to right: Mr Matteo SALVINI, Italian Minister for the Interior; Mr Davor BOZINOVIC, Croatian Minister of the Interior. Copyright: European Union Event: Informal Meeting of Justice and Home Affairs Ministers – July 2018

This article is brought to you in association with the European Commission.


The Commission took stock today of the additional fiscal effort announced by the Italian authorities this week and concluded that it was material enough not to propose to the Council the opening of an Excessive Deficit Procedure (EDP) for Italy’s lack of compliance with the debt criterion at this stage.

Valdis Dombrovskis, Vice-President for the Euro and Social Dialogue, also in charge of Financial Stability, Financial Services and Capital Markets Union, said: I welcome the actions taken by the Italian government to ensure a better budget outcome in 2019.  Ensuring sound public finances is a bedrock for confidence and growth. Respecting the commitment to prepare a 2020 budget in line with the EU fiscal rules and thus avoiding further uncertainty will be important in this context.”

Pierre Moscovici, Commissioner for Economic and Financial Affairs, Taxation and Customs, said: “The aim of the Stability and Growth Pact is not to punish or discipline anyone; it is to ensure that governments pursue sound public finances and correct problems swiftly when they occur. I am pleased to note this is the case today. The Italian government has responded to the Commission’s signal one month ago that an Excessive Deficit Procedure was warranted by adopting a sound package of measures that ensure broad compliance with the Pact. We will carefully monitor the implementation of these measures in the second half of the year. Moreover, we stand ready to ensure that the 2020 draft budget to be presented this autumn will be compliant with the Pact. I have no doubt that we will work seamlessly in this context with the next Commission.”

On 5 June 2019, the Commission assessed in its report under Article 126(3) of the Treaty the factors behind Italy’s breach of the debt benchmark in 2018. The report examined Italy’s budgetary outturn in 2018 and the fiscal forecasts for 2019 and 2020 and concluded that an EDP was warranted. This conclusion was supported by the Economic and Financial Committee in its opinion adopted on 11 June 2019. The Member States also invited Italy to ‘take the necessary measures to ensure compliance with the provisions of the Stability and Growth Pact in accordance with the EDP process’, and added that ‘further elements that Italy may put forward could be taken into account by the Commission and the Committee’.

On 1 July, the Italian government adopted its mid-year budget for 2019 as well as a decree-law, which include a correction for 2019 amounting to €7.6 billion or 0.42% of GDP in nominal terms. As a result, Italy’s headline deficit is expected to reach 2.04% of GDP in 2019 (compared to 2.5% in the Commission 2019 spring forecast), which was the target enshrined in the 2019 budget as adopted by the Italian Parliament. The correction in structural terms is slightly greater, amounting to €8.2 billion or 0.45% of GDP, leading to an improvement in the structural balance of around 0.2% of GDP (compared to a deterioration of 0.2% in the Commission 2019 spring forecast). The difference compared to the nominal amount is due to the lower-than-expected one-off revenues from the tax amnesty of around €0.6 billion, which worsen the fiscal target in nominal but not in structural terms. These figures do not take into account the 0.18% flexibility provisionally granted to Italy for ‘unusual events’ related to the collapse of the Morandi Bridge and to hydrogeological risks, which will need to be confirmed ex-post based on the outturn data for 2019.

Taking into account the provisions adopted on 1 July, Italy is expected to be broadly compliant with the required effort under the preventive arm of the Stability and Growth Pact (SGP) in 2019, bridging the 0.3% of GDP gap estimated on the basis of the Commission spring forecast. Moreover, the additional fiscal effort delivered by the government for 2019 is such that it also partially compensates the deterioration in the structural balance recorded in 2018.

Finally, as regards 2020, the Italian government has reiterated its commitment to achieve a structural improvement in line with the requirements of the SGP, notably through a new spending review and revision of tax expenditures, as well as improved no-policy change projections reflecting the favourable trends observed so far in 2019. This information was set out in a letter sent on 2 July to the Commission from Prime Minister Giuseppe Conte, and Economy and Finance Minister Giovanni Tria.

Next steps

The Commission will keep under surveillance the effective implementation of this package: It will monitor closely the execution of the 2019 budget and will assess the compliance of the 2020 draft budgetary plan with the Stability and Growth Pact. Moreover, progress with structural reforms in the country-specific recommendations will be key to ensure higher growth and thereby contribute to a decrease in the debt-to-GDP ratio. The Commission will assess the implementation of these reforms within the context of the European Semester.

Background

The EDP is the ‘corrective arm’ of the Stability and Growth Pact and is designed to safeguard the requirement laid out in the Treaty that Member States should avoid excessive levels of deficit and debt.

The basis for triggering an EDP is a general government deficit in excess of the 3% of GDP, and/or a debt level above 60% of GDP and insufficiently diminishing towards that level. Currently, no Member State is in the corrective arm of the Pact, following Spain’s exit in June 2019.

the sting Milestones

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

The EU learns about fishing and banking from tiny Iceland

Which EU countries have to correct their economic policies?

CHALLENGING THE ZEITGEIST OF DIGITAL – Change making projects innovate mobile support for refugees, inclusive environments, early breast cancer detection and more

One good reason to feel less blue about the future of our oceans

Europe bows to Turkey’s rulers, sends Syrian refugees back to chaos

Data exchanges: Strengthening Europol cooperation with non-EU countries

Jellyfish are taking over the world – and climate change could be to blame

UN welcomes ‘most comprehensive agreement ever’ on global health

These Asian economies invested in their people – and it paid off

Conflict of interest and misuse of EU funds: The case of Czech PM Babiš

Natural gas: Parliament extends EU rules to pipelines from non-EU countries

Mobile technology facilitating social distance in the middle of a pandemic

Eliminating hepatitis calls for ‘bold political leadership, with investments to match,’ UN health chief says

Some 300,000 Venezuelan children in Colombia need humanitarian assistance; UNICEF looks to boost response funding

Youth Internationalization: part of everyday life in JADE

EU elections 2019: Rise of nationalist trends and populism in Europe challenges the EU edifice

COVID-19: the universal enemy on the battlefield

Finance for SMEs: Alternative supply mechanisms do exist

Commerce is on the cusp of radical change. Is your organization ready?

Deep fakes could threaten democracy. What are they and what can be done?

UN cooperation with League of Arab States ‘pivotal’, UN chief tells Security Council

Migration: Commission takes action to find solutions for unaccompanied migrant children on Greek islands

HIV: embrace not disgrace

Regulate social media platforms to defend democracy, MEPs say

A new catastrophic phase in the Syrian carnage

Coronavirus: Commission approves contract with CureVac to ensure access to a potential vaccine

The impact of COVID-19 on the life of the elderly

COVID-19 is more deadly for some ethnic groups

Disappearing water in a warming climate: a story in four visuals

State aid: Commission approves €39.7 million Latvian measures to recapitalise Riga International Airport

6 ways travelling professionals can cut their carbon footprint

Germany openly seeks more advantages for its banks

‘Collective amnesia’ over causes of global financial crash – human rights expert

The European Parliament x-rays the troika’s doings

Coronavirus: Commission concludes exploratory talks with Valneva to secure a new potential vaccine

Deliver ‘significant results now’, UN General Assembly President tells COP25 climate conference

Gender parity has a huge role to play in the fight to save our oceans

Behind the firewall: a discussion on the evolution of cybersecurity in the utility industry

Austria’s EU Presidency: Chancellor Sebastian Kurz aims to “build bridges”

Why quantum computing could make today’s cybersecurity obsolete

EU deploys immediate assistance to help Cyprus contain devastating forest fires

World Migratory Bird Day highlights deadly risks of plastic pollution

Vulnerable young people must not be blamed & stigmatised for violent radicalisation

West Darfur tensions could see 30,000 flee across Sudanese border to Chad: UN refugee agency

Independent Ethics Body: improving transparency and integrity in EU institutions

Do we need a new Marshall Plan to rebuild Europe after COVID-19?

A Sting Exclusive: “Doing ourselves a favour”, Vice President Dombrovskis underscores that this time growth has to come from within the EU

Portuguese Presidency outlines priorities to EP committees

COVID-19 sparked an economic crisis ‘like no other’ – but these measures can help now: WHO, IMF

‘Continuing deterioration’ leaves Mali facing critical security level: UN expert

Italy and Greece zeroed their fiscal deficits, expect Germany’s response

NextGenerationEU: European Commission disburses €12.1 million in pre-financing to Luxembourg

Venezuela: Parliament calls for urgent EU help for people fleeing the country

Commission notifies the Republic of Panama over the need to step up action to fight against illegal fishing

How defining intangible investments can help grow the knowledge economy

Both sides in Libya conflict agree need for lasting ceasefire: UN negotiator

What is the UN General Assembly and what does it do?

20 years on from landmark Mine Ban Treaty, dangers on the rise to life and limb

Making Artificial Intelligence ethical, safe and innovative

A Valentine’s Special: giving back, a dialogue of love

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

%d bloggers like this: