Italian Prime Minister Giuseppe Conte has said his country has no 'Plan B' after the EU took the unprecedented step of ruling the national budget did not comply with its spending rules.
EU member nations are obliged to follow fiscal rules articulated in the Stability and Growth Pact. These rules aim to foster fiscal discipline and ensure co-ordinated and responsible spending policy.
The European Commission’s Pierre Moscovici, Commissioner for Economic and Financial Affairs, said Italy would be given three weeks to amend its proposed budget.
“The opinion adopted today by the commission should come as no surprise to anyone, as the Italian government’s draft budget represents a clear and intentional deviation from the commitments made by Italy last July,” he said.
The European Commission rejected Italy’s budget, an unprecedented step in the bloc’s history https://t.co/64hZ0yhzjs
— Bloomberg (@business) October 23, 2018
The EU sees “no alternative” to Italy redrafting its 2019 budget
In a statement, the Commission said it wants Italy to borrow less and aim for a much smaller deficit.
“The euro area is built on strong bonds of trust, underpinned by rules that are the same for everybody,” Valdis Dombrovskis, Vice-President for the Euro and Social Dialogue, said.
“It is our job and duty to uphold common interest and mutual commitments taken by the member countries. Italy’s debt is among the highest in Europe, and Italian taxpayers spend about the same amount on it as on education. In this spirit, we see no alternative but to request the Italian government to revise its draft budgetary plan for 2019.”
Dombrovskis warned the Italian public of the perils of ignoring the country’s financial woes. “Breaking rules can appear tempting at the first look – it can provide the illusion of breaking free,” he said.
“It is tempting to try and cure debt with more debt. At some point, the debt weighs too heavy… you end up having no freedom at all.”
Italy is a ticking time bomb that threatens to cause the next recession https://t.co/2IVyFOeEtE
— The Economist (@TheEconomist) October 23, 2018
Italian political leaders reacted with disdain to the EU’s intervention
Moscovici made clear that the commission was open to ongoing consultations with Italy to assist it with compliance. “We wish to continue our constructive dialogue with the Italian authorities,” he said.
One Italian politician, Angelo Ciocca, made his distaste for Moscovici’s comments clear by snatching the Commissioner’s notes after he left and whacking them with his shoe.
On Twitter, Ciocca posted a video of the incident. His tweet, in translation, says the notes were “a mountain of lies” and that “Italy deserves RESPECT and these #EuroImbecilli have to understand it”.
“We do not LOWER THE HEAD anymore !!!”
Ciocca is a member of Italy’s Northern League, a populist party with a strong adherence to Euroskepticism. The party came to power on a wave of anti-EU sentiment as part of the Five Star Coalition.
A #Strasburgo, HO CALPESTATO (con una suola Made in Italy!!!) la montagna di BUGIE che #Moscovici ha scritto CONTRO il #NostroPaese !!! L’Italia merita RISPETTO e questi #EuroImbecilli lo devono capire, non ABBASSIAMO PIÙ LA TESTA !!! Ho fatto bene ??? pic.twitter.com/Dx5OeM0RMs
— Angelo Ciocca (@AngeloCiocca) October 23, 2018
Italy is saddled with dangerous levels of debt
Italy’s economy has been hamstrung by stagnant growth and poor productivity in recent years.
Its public debt has spiralled out of control and now totals more than 130% of the nation’s gross domestic product. It has the second-highest debt to GDP ratio in the EU after the still-ailing Greece. The figure is well above the EU’s limit of 60%.
Despite this, the rhetoric from Italian leaders on the EU’s intervention matched Ciocca’s defiant gesture. One of Italy’s Deputy Prime Ministers, Matteo Salvini, wrote on Facebook: “We’re going ahead with a smile, Italians ask that of us. We’re convinced we’re in the right. #TeamItaly.”
Salvini’s Co-Deputy Prime Minister, Luigi di Maio, wrote: “This is the first Italian budget that the EU doesn’t like. No surprise: This is the first Italian budget written in Rome and not in Brussels!”
Header image credit: NATO North Atlantic Treaty Organization