The Italian government on Tuesday defied the European Commission by sticking to its big-spending budget plan, risking financial sanctions in a high-stakes standoff with Brussels.
Despite pressure from the European Commission, which rejected Rome’s budget outright last month in a first for the EU, Italian Deputy Prime Minister Luigi di Maio vowed to stand firm on the nation’s anti-austerity plans.
“The budget will not change, neither in its balance sheet nor in its growth forecast. We have the conviction that this is the budget needed for the country to get going again,” Di Maio, who leads the anti-establishment Five Star Movement (M5S), said on Tuesday evening after a ministerial meeting.
M5S and its coalition partner, the far-right League, insist the budget would help kick-start growth in the eurozone’s third-largest economy, and reduce the public debt and deficit.
The European Commission gave Italy until Tuesday to make changes to its plans and warned non-compliance could activate the Excessive Deficit Procedure (EDP), a complicated process that could lead to fines and possibly provoke a strong, adverse market reaction.
Italy intends to run a public deficit of 2.4 percent of GDP next year — three times the target of the government’s center-left predecessor — and one of 2.1 percent in 2020, but Brussels forecasts Italy’s deficit would reach 2.9 percent of GDP next year and hit 3.1 percent in 2020 — breaching the EU’s 3 percent limit.
Italian Deputy Prime Minister Matteo Salvini, who is also the leader of the League, on Monday vowed to put his back into “defending the budget, as if it were a rugby scrum.”
While Rome targets economic growth of 1.5 percent, Brussels anticipates just 1.2 percent, putting Italy at the bottom of the EU table.
The IMF forecasts growth of 1 percent for 2020 and was skeptical of Italy’s reform program in its latest report on the nation.
Italian Minister of Economy and Finances Giovanni Tria has accused Brussels of getting its sums wrong.
It would be “suicide” to try to reduce the deficit to the previous goal of 0.8 percent of GDP, he has said, insisting “we must get out of the trap of weak growth.”
The big problem is Italy’s public debt, now 2.3 trillion euros (US$2.6 trillion), or 131 percent of GDP, is way above the 60 percent EU ceiling.
The fine for refusing to review the budget could correspond to 0.2 percent of Italy’s GDP — about 3.4 billion euros.
European Commissioner for Economic and Monetary Affairs and the Euro Pierre Moscovici has said he hopes a compromise can be found to avoid sanctions.
Speaking on Tuesday to the European Parliament, German Chancellor Angela Merkel said the EU wanted to reach out to Italy, a founding member.
“But Italy also adopted the many rules that we now all have in common,” she added.
The European Commission “will make the first step to move Italy into EDP” after a debt update expected on Nov. 21, former Italian department of treasury chief economist Lorenzo Codogno said.
The nation would likely be given three to six months to prepare correction plans, after which nothing would happen until a new European Commission takes office at the end of next year following European Parliament elections, he said.
“The true guardians of fiscal discipline will be, as usual, financial markets,” he said.
All eyes are now on the spread — the difference between yields on 10-year Italian government debt compared with those in Germany — which has more than doubled since May.
A wider fear is that stress in Italy could spread to other European nations which are only just recovering from the eurozone debt crisis.
“We do not expect a crisis that would lead to a loss of market access,” Economist Intelligence Unit analyst Agnese Ortolani said.
However, the nation’s debt and the weakness of its banking sector mean “Italy would be too large to rescue without massive ECB [European Central Bank] support in the event of a large-scale financial crisis,” she said.
Nearly half of China’s major cities are suffering “moderate to severe” levels of subsidence, putting millions of people at risk of flooding, especially as sea levels rise, according to a study of nationwide satellite data released yesterday. The authors of the paper, published by the journal Science, found that 45 percent of China’s urban land was sinking faster than 3mm per year, with 16 percent at more than 10mm per year, driven not only by declining water tables, but also the sheer weight of the built environment. With China’s urban population already in excess of 900 million people, “even a small portion
UNSETTLING IMAGES: The scene took place in front of TV crews covering the Trump trial, with a CNN anchor calling it an ‘emotional and unbelievably disturbing moment’ A man who doused himself in an accelerant and set himself on fire outside the courthouse where former US president Donald Trump is on trial has died, police said yesterday. The New York City Police Department (NYPD) said the man was declared dead by staff at an area hospital. The man was in Collect Pond Park at about 1:30pm on Friday when he took out pamphlets espousing conspiracy theories, tossed them around, then doused himself in an accelerant and set himself on fire, officials and witnesses said. A large number of police officers were nearby when it happened. Some officers and bystanders rushed
HYPOCRISY? The Chinese Ministry of Foreign Affairs yesterday asked whether Biden was talking about China or the US when he used the word ‘xenophobic’ US President Joe Biden on Wednesday called for a hike in steel tariffs on China, accusing Beijing of cheating as he spoke at a campaign event in Pennsylvania. Biden accused China of xenophobia, too, in a speech to union members in Pittsburgh. “They’re not competing, they’re cheating. They’re cheating and we’ve seen the damage here in America,” Biden said. Chinese steel companies “don’t need to worry about making a profit because the Chinese government is subsidizing them so heavily,” he said. Biden said he had called for the US Trade Representative to triple the tariff rates for Chinese steel and aluminum if Beijing was
Beijing is continuing to commit genocide and crimes against humanity against Uyghurs and other Muslim minorities in its western Xinjiang province, U.S. Secretary of State Antony Blinken said in a report published on Monday, ahead of his planned visit to China this week. The State Department’s annual human rights report, which documents abuses recorded all over the world during the previous calendar year, repeated language from previous years on the treatment of Muslims in Xinjiang, but the publication raises the issue ahead of delicate talks, including on the war in Ukraine and global trade, between the top U.S. diplomat and Chinese