Italy budget: EU rejects new spending plans

Reuters/Darren
Staples

• European Union formally rejects Italian budget for a
  second time after Rome makes only small tweaks.
• The path is no set for the opening of the EU’s
  so-called Excessive Deficit Procedure — which has the power to
  fine countries within the Eurozone.
• The budget proposes increasing
  both Italy’s overall government debt and its deficit in the
  short run, pushing the deficit as high as 2.4% of gross
  domestic product over the coming years.
• In doing so, Italy would fall foul of a previously
  mandated maximum deficit level of 0.8% of GDP. 

The European Union on Wednesday once again rejected the Italian
government’s proposed budget for 2019, paving the way for
financial sanctions against the continent’s fourth largest
economy.

The budget proposes 
increasing
both Italy’s overall government debt and its deficit in the short
run
, pushing the deficit as high as 2.4% of gross
domestic product over the coming years. This means Italy would
fall foul of a previously mandated maximum deficit level of 0.8%
of GDP. 

Having already rejected initial proposals from Italy, the EU
asked the country’s politicians to go back to the drawing board,
but Italy made only minor tweaks, which have not satisfied the
European Commission, leading to the second rejection.

“Our analysis suggests that the debt rule must be
considered to have not been respected,” the Commission said in a
statement on Wednesday morning,
according to the ANSA news agency.

The rejection, it said, means that Italy will now be
subject to the so-called Excessive Deficit Procedure — which has
the power to fine countries within the Eurozone who break
spending rules within the bloc. The size of any fine is
unclear.

“We conclude that the opening of a procedure for excessive
deficit based on the debt is therefore justified,” the European
Commission’s statement said.

Prior to their initial rejection, the European Union had
never formally dismissed a eurozone member’s budget
plans. 

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Italy’s government remained resolute in its plans, despite
the second rejection, with Lega Nord leader Matteo Salvini saying
he will talk to the Commission about the findings “politely, as
always, but will carry on.”

He added, however, that he is not willing to talk to the
Commission about the deficit, saying that Italy’s coalition is
determined to enact the increased deficit.

Italian Prime Minister Giuseppe Conte, a technocrat, is set
for talks with European Commission President Jean-Claude Juncker
this weekend.