Italy defends controversial high spending budget to EU

22 Oct 18

Italy’s plans for increased public spending will be in the interest of the “entire European economy”, the country has told Brussels in a response to criticism of its draft budget.

In a letter to the European Commission published today, Giovanni Tria, the Italian economy minister, said his government’s 2019 budget proposals, which increases the deficit to cover spending, were necessary to restart economic growth.

This comes as the European Commission has indicated it is unhappy with Italy’s proposals to set the budget deficit at 2.4% of GDP to cover its spending plans, which include new social welfare policies and better pensions.

Tria said he would like “constructive” talks with Brussels and claimed the plans would “not expose the financial stability of Italy or of the other countries of the European Union to risks”.

“We believe, in fact, that the strengthening of the Italian economy is also in the interest of the entire European Union.”

Reuters has reported that the Italian government expects its budget to be rejected by the Commission tomorrow - something that has not happened since 2013, when the Commission gained powers over member states’ budgetary plans.

If the budget is rejected, Brussels would ask Italy to revise its spending plans and re-submit them to the Commission.

Although Italy’s deficit budget is short of the EU’s deficit limit of 3% of GDP, the country had pledged to cut its debt, which stands at 131% of national output. These spending plans will add to its debt.

The EU economic commissioner Pierre Moscovici told French TV last month, when the plans were agreed, that this could create a “crisis” between the [European] Commission and Italy.

Although the bloc did not want “a crisis between the [European] Commission and Italy” because “Italy is an important euro zone country”, he said that the EU would not be happy if “Italy does not respect the rules and does not reduce its debt”.

According to Eurostat, the only country with higher debt than Italy is Greece.

Before the populist government came to power in March this year, the centre-left power was aiming for a 0.8% budget deficit with a view to balancing the books by 2020.

The new 2.4% deficit is set for 2019 and the following two years after that. This is up from 1.8% in 2018.

Last month the Italian cabinet put forward a controversial ‘bribe destroyer’ bill to meet the election pledges by the anti-establishment 5-Star Movement to root out corruption.

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