EU warns of instability as Italy refuses to budge on budget

22 Nov 18

Italy’s determination to maintain high spending plans mean it is “sleepwalking into instability”, the European Commission said as it cleared the path for sanctions.

In October, the commission called on Italy to revise its budget for the next year to rein in spending – the first time it has taken such an action – because of the country’s high national debt.

But Italy decided to stick with its controversial spending plans.

Commission vice-president Valdis Dombrovskis said on 21 November: “With what the Italian government has put on the table, we see a risk of the country sleepwalking into instability.”

He added that the EU's disciplinary measure, known as the “excessive deficit procedure”, was now appropriate.

Under these rules, countries may be fined 0.2% of GDP, which for Italy’s economy – the third largest in the eurozone – would be billions of euros.

However, the process could take a long time and the commission said it was open to talks with Italy on how to address the disagreement.

On Twitter, Pierre Moscovici, commissioner for economic and financial affairs, taxation and customs, said Italy’s draft plans were in “particularly serious non-compliance” with EU recommendations.

“First the member states must give their views within two weeks, then the European Commission will have to prepare the procedure, including a new recommendation for Italy to correct its deficit and debt trajectory,” he said. 

The commission told the government to revise its budget because it worries the high spending plans and budget deficit could cause instability for the whole of the EU.

Italy’s debt stands at more than 130% of GDP, the second largest national debt in the EU, after Greece.

The Italian government, which came to power at the beginning of this year, has hailed the budget as one that would “end poverty. It includes reversing plans to raise the retirement age and a guaranteed basic income for poor families. It also includes tax cuts and further economic reforms.

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