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The "worried" eurozone looks at the Italian budget



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The "worried" eurozone looks at the Italian budget
©
AFP / files
/ Filippo MONTEFORTE

Finance ministers in the eurozone, who will meet in Brussels on Monday, are expected to face the European Commission with the Italian populist coalition, whose budget was rejected two weeks ago.

"Everyone is worried," says a senior EU official who is cautious about the conflict between the Commission, the guarantor of the fiscal rules of the EU and the Italian government, which is determined to defend its budget in 2019, but completely outside the nail.

Eurozone ministers "will want to foster dialogue with the Italians," says a diplomatic source. But they will also have the "heart to remember their support to the Commission (…) Rules are rules.

On October 23, Brussels rejected the Italian draft budget, which was the first in its history and condemned the "clear and clear deviation" of European regulations.

The Commission criticizes the populist coalition in Rome, consisting of the Left (right) and the Five Star (M5S, the counter-system), in order to have a deficit of 2.4% of gross domestic product (GDP) in 2019, far beyond what was announced earlier central left (0.8%).

Italy has until the 13th of November to provide a revised budget, otherwise it will be exposed to an 'excessive deficit procedure' that could lead to financial sanctions. "Unavoidably," if nothing changes, promises a European source.

"The process will begin, but the dialogue phase will take place," replied Luigi Di Maio, head of the M5S, on Monday in the Financial Times. "I do not think we will go into financial penalties."

The Deputy Prime Minister is convinced that it is possible to "significantly reduce the public debt with a large budget" and that the "recipe" imitates Italian if it works.

Matteo Salvini, the vice-president of the league, called on his supporters to prove in Rome on December 8 that they will calmly say "Mr Bruxelles: let's do, live and breathe." "Italy is never on its knees," he said.

"Basta!"

The economic and social situation in Italy is concerned with the unemployment rate of 10.1%, well above the euro area average (8.1%) and stagnation in the third quarter (+ 0.0%), the first three years, which could had consequences in the battle with Brussels.

The coalition really built its 2019 budget for a very optimistic growth forecast of 1.5% when the International Monetary Fund (IMF) accounts for only 1%, the European Commission – which has to submit 1.1% new forecasts on Thursday.

But if growth is weaker than expected, the deficit may be even greater.

Because of the worse situation, Rome, which already tends to be under a large debt of EUR 2,300 billion (131% of GDP), estimated that its debt was reduced by Moody's, while Standard & Poor's reduced its perspectives from stable to negative.

"The coalition is a test in this classification," says Sebastien Maillard, director of the Jacques Delors Institute.

"But I think that the League's voters will try to tell + the bastard!" As Italy is isolated, "it adds," if the spread (a carefully protected difference between the levels of the ten-year German and Italian loans, ed) becomes worrying. "

The spread is now about 300 basis points, compared to an average of 130 in the first four months of the year.

Governor of the Bank of Italy, Ignazio Visco, also expressed concern about the consequences of the increase in Italian loans.

Italian banks, which seemed fragile, were tested by the European Banking Authority on Friday, while EU banks faced a pessimistic fictitious scenario.

11.5.2018 13:10:57 –
Brussels (AFP) –
© 2018 AFP


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