Thursday , June 1 2023

Despite the European Commission's ultimatum, Italy does not "change"


Luigi Di Maio, deputy prime minister and five-star activist (M5S, dissident) leader in Rome on November 13.
Luigi Di Maio, deputy prime minister and five-star activist (M5S, dissident) leader in Rome on November 13. Andrew Medicini / AP

The Italian Populist government, convened by the European Commission to review the 2019 budget, decided on Wednesday (November 14th) to keep the same. He is in Brussels & # 39; Flexibility & # 39; According to a copy of a letter to the European Commission that should take into account the costs associated with the collapse of the Morani diagonal in Genoa and the bad weather, "Requires the application of flexibility to exceptional cases", Giovanni Tria, the Italian Minister of Economy.

The draft budget predicts a 2.4% deficit of GDP in 2019. Tria, nevertheless, in his letter, this figure "Limits that can not be overcome".

Thus, Italy is risking financial sanctions, and its implementation is rather hypothetical. "The budget does not change, it does not change in the balance sheet or growth forecast, and we are confident that this budget needs the country to start again."Just before the deputy prime minister and five-sex movement leader (M5S, dissident) of Luisi Di Maio.

"Our goal is to keep the deficit at 2.4% of GDP, and we are doing our best to keep it"He added to the press after a meeting with the ministerial meeting and boss of Martin righto, his ally, and Giuseppe Conte, head of government. "We are working on a budget that guarantees more jobs and more pension rights and lower taxes. (…). If it fits better in Europe, if it does not fit in Europe,Salvini said he had arrived at this meeting.

Also read Italy Budget Rejection: What Are the Dangers in Italy Salvini?

Overestimated growth?

For governments, austerity budgets will promote bloodless growth and reduce the public deficit and the country's mass public debt. But for the first time in the history of the European Union, the Brussels authorities rejected the Italian draft budget on October 23. Italian nationals, supported by the whole euro area, are deaf to Italy's claim that it is 2.4% of GDP in 2019 and 2.1% in 2020.

According to the committee, the budgeted measures could push the deficit to 2.9% next year and 3.1% in 2020. In particular, Rome is expected to grow by 1.2%, which is 1.5%.

In a report released Tuesday afternoon, the International Monetary Fund (IMF) reaffirmed Italy's 1% growth prospects in 2020 and was skeptical of the government's announced reforms. "The interest in the growth and social inclusion of the authorities is welcome"The fund said, but the current forecast is expected to hold roughly 130% of GDP in the next three years.

Economy Minister Giovanni Tria is expected to send letters to Brussels in the next few hours to explain the government's decision, along with the government's planned restructuring and investment plan announcement, according to Italian media. .

"Excessive deficit procedure"

By refusing to change the budget, "Excessive deficit procedure"It may lead to financial sanctions of 0.2% of GDP (about 3.4 billion euros).

In front of the European Parliament in Strasbourg, German Chancellor Angela Merkel said the European Union "Reach" Italy, the founding country of the Union. "Italy has adopted many of the rules we all have in common"She recalled. "I hope I can find a solution". Pierre Moscovici, European Economic Commissioner, also urged dialogue. "compromise".

Meeting with Europeans

According to Lorenzo Codogno (founder of LC Macro Advisors in Italy), Italy has an excessive deficit procedure (EDP) "By the end of January", But the period of 3-6 months to prepare the plan for modification "Italy will be able to reach European elections without obstacles". then "Nothing will happen until the new committee takes its place" Fall 2019.

According to Codogno, if rapid action is not taken at the European level, "As usual, the true guardian of budgetary discipline".

Since mid-May, the date of the debate for the formation of the Popularist Union, spreadThe gap between the German and Italian borrowing rates has doubled and now stands at around 300 points. According to the Bank of Italy, this represents an additional interest cost of EUR 1.5 billion over six months.

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