The italian government’s new debt plans have met with clear criticism in brussel. EU commission vice president valdis dombrovskis said over the weekend they contradicted EU law and violated commitments made.
Italy’s economy minister giovanni tria, meanwhile, stressed that overall debt will continue to fall over the next three years thanks to growth.
However, president sergio mattarella and central bank chief ignazio visco signaled concerns about the plans. In a speech, mattarella alluded to the constitutional obligation to keep public finances in order.
Italy’s new government announced on thursday that it would target a deficit of 2.4 percent of gross domestic product (gdp) in 2019, three times higher than the previous government’s target. Due to the high level of government debt, these plans also caused unrest on the markets.
"I am clearly aware of european concerns," tria told the daily newspaper "il sole 24 ore". But the national debt – at 132 percent of GDP the highest in the eurozone behind greece – is set to fall by one percentage point in the period 2018 to 2020. This was possible through additional growth, because higher spending stimulated the economy, tria continued. These were his first revisions after he failed to get his government to agree to a lower deficit.
Tria also pointed out that there would be a safeguard clause to limit spending if growth targets were not met. For 2018, according to the newspaper, he expects a growth of 1.6 percent and for 2019 a plus of 1.7 percent of GDP. The organization for economic co-operation and development (OECD) had recently published its forecasts, which were significantly lower at 1.2 percent for 2018 and 1.1 percent next year.
"It is clear that the budget presented – which foresees a substantial increase instead of a reduction in the structural deficit – is in contradiction with italy’s commitments, which all eu states have agreed to," eu commissioner dombrovskis told the italian newspaper "corriere della serra.". Like every country in the euro zone, the italian government must respect its commitments and obligations.
The coalition of the populist funf-sterne movement and the right-wing lega will triple the deficit target of 0.8 percent promised by the previous government. According to the so-called maastricht criteria, 3 percent is permissible. However, precisely because of its significantly higher national debt, italy is obliged to meet a whole series of other requirements.
Rome has to submit the complete draft budget by 15 december. October to the EU commission in brussels. This must then examine the plan in detail.