EU says concerned over Italy's 2018 budget, adding to government's woes

Thrugelmir

The growing influence of Brussels over National affairs.

The European Commission sent a letter on Friday to Italy’s finance minister urging clarifications over the country’s planned budget for 2018, adding to Rome’s headaches ahead of elections due by next May.

The move could force Rome to cut expenditures or raise taxes to comply with EU fiscal rules. Both are unpalatable measures before elections planned by May and amid deepening political divisions within the ruling Partito Democratico (PD).

The EU executive, which has the power to reject a euro zone country’s budget if it deems it in serious breach of EU fiscal rules, said Italy’s draft budgetary plans created risks of “a significant deviation from the required effort in 2017 and 2018 together”.

A source from Italy’s Finance Ministry said Rome will soon reply to the commission’s letter and expressed confidence that the clarifications that will be provided will be sufficient to resolve the matter.

The unexpected rift with Brussels adds to the woes of Italy’s Prime Minister Paolo Gentiloni who has recently faced strong criticism from PD leader, Matteo Renzi, on his confirmation of Bank of Italy’s Governor Ignazio Visco.

The Italian parliament, which has to approve the budget, is deeply divided and many lawmakers have already showed little enthusiasm for the low-key budget presented by the outgoing executive.

Under EU fiscal rules, Italy was required to have a structural adjustment, which excludes the economic cycle and one-off measures, of 0.6 percent of its gross domestic product in 2018.

The government pledged to reach an adjustment of only 0.3 percent when it presented its budget in mid October, a move meant to please political forces which oppose new austerity measures and weaken the appeal of growing populist parties.

The commission had let Rome understand that it would have approved this smaller effort. However, it has now estimated that the actual structural effort would only be 0.2 percent, it said in a letter sent to Italy’s Finance Minister Pier Carlo Padoan.

Structural corrections are meant to reduce a country’s public debts, an objective that is particularly important for Italy which has a debt above 130 percent of GDP, which is the second highest in the EU after bailed-out Greece.

The commission said its preliminary assessment indicated that Italy would breach the EU targets for the gradual reduction of its huge debt.

The letter, dated October 27, was sent one week after Italy submitted an updated version of its draft budget. Italy has to provide clarifications by October 31 and could even risk the rejection by the commission of the budget.

Brussels also estimated a lower-than-required reduction of the country’s primary expenditure, which excludes interests on the debt.

Euro zone countries’ primary expenditures are set to be scrutinized more closely by markets as the European Central Bank reduces its monthly purchases of government bonds, a move that is expected to gradually increase interest payments for states with less solid public finances, like Italy.

The commission also asked Rome to clarify its forecast expenditures for migrants, whose arrivals from Africa have substantially dropped in recent weeks.

To sweeten the pill, the commission said its assessment of Italy’s budget “will take due account of the goal of achieving a fiscal stance that contributes to both strengthening the ongoing recovery and ensuring the sustainability of Italy’s public finances.”

The commission also required further information on the next year’s budgets from France, Portugal, Spain and Belgium.

http://uk.reuters.com/article/us-italy-budget-eu/eu-says-concerned-over-italys-2018-budget-adding-to-governments-woes-idUKKBN1CW2HN

tracey3596

Thrugelmir wrote: »

The growing influence of Brussels over National affairs.

Ah yes, because (obviously) Italy is not France or Germany.
See older regarding those below.
http://www.telegraph.co.uk/news/worldnews/europe/eu/11207721/Why-do-France-and-Germany-keep-breaking-EU-rules.html
http://uk.reuters.com/article/uk-eu-deficit-france/eu-gives-budget-leeway-to-france-because-it-is-france-juncker-idUKKCN0YM1N0

vivatifosi

Thrugelmir wrote: »

The growing influence of Brussels over National affairs.

http://uk.reuters.com/article/us-italy-budget-eu/eu-says-concerned-over-italys-2018-budget-adding-to-governments-woes-idUKKBN1CW2HN

I don't think this is unreasonable for countries in the eurozone. If Italy doesn't sort its issues out it is the fourth biggest country in the EU, will be third biggest when we leave. It accounts for about 11 or 12% of the total EU GDP and that will only go up.

Too big to fail springs to mind.

Thrugelmir

vivatifosi wrote: »

I don't think this is unreasonable for countries in the eurozone. If Italy doesn't sort its issues out it is the fourth biggest country in the EU, will be third biggest when we leave. It accounts for about 11 or 12% of the total EU GDP and that will only go up.

Too big to fail springs to mind.

The electorate may feel differently. That's the concern.

cogito

tracey3596 wrote: »

Ah yes, because (obviously) Italy is not France or Germany.
See older regarding those below.
http://www.telegraph.co.uk/news/worldnews/europe/eu/11207721/Why-do-France-and-Germany-keep-breaking-EU-rules.html
http://uk.reuters.com/article/uk-eu-deficit-france/eu-gives-budget-leeway-to-france-because-it-is-france-juncker-idUKKCN0YM1N0

Absolutely. Germany runs a trade surplus vastly in excess of EU rules and France has a budget deficit way in excess of EU rules. Have they received letters from the European Commission? Probably not but even if they had, would they pay any attention?

France's excuse is that they have to spend more money to beef up security following terrorist attacks. For which read 'we will use any excuse available to avoid complying with budget deficit rules'. And because it's France.

cybermum

I am Italian . Let me tell you , we have had enough. Cogito sums it up succinctly above.
Hence a chasm appearing , more noticeable with Lombardy and Veneto regions calling for autonomy.

economic

cybermum wrote: »

I am Italian . Let me tell you , we have had enough. Cogito sums it up succinctly above.
Hence a chasm appearing , more noticeable with Lombardy and Veneto regions calling for autonomy.

its strange to hear comments like yours since we are bombarded by the media about how great things are being part of the EU. if only more people like you voiced your opinions.

the sooner the EU disintegrates the better it will be overall. of course the corrupt eu politicians will lose their jobs so they wont be very happy

BLOW_FLY

cybermum wrote: »

I am Italian . Let me tell you , we have had enough. Cogito sums it up succinctly above.
Hence a chasm appearing , more noticeable with Lombardy and Veneto regions calling for autonomy.

Hypothetical question, do you think Italy / Italians would vote to leave the EU if presented with a Brexit type vote / referendum?

BF

vivatifosi

cybermum wrote: »

I am Italian . Let me tell you , we have had enough. Cogito sums it up succinctly above.
Hence a chasm appearing , more noticeable with Lombardy and Veneto regions calling for autonomy.

What do the Italian people (as opposed to politicians) want to see as an alternative?

marrbett

It's all going to end in tears
https://www.themaven.net/mishtalk/economics/9eWeNMVQj0ijTGJNCTrSpQ/

wunferall

marrbett wrote: »

It's all going to end in tears
https://www.themaven.net/mishtalk/economics/9eWeNMVQj0ijTGJNCTrSpQ/

It certainly is looking like it. The thing is though, tears for who? Italy or the EU?