Italy Denies To Change Budget Proposal And Meet EU Directions

The stalemate between Italy and the European Commission entered a new phase of conflict over Italy’s proposed budget for next year after the populist coalition government of Italy openly defied the European Commission’s directive to make changes o t a draft plan for the budget to conform to the fiscal norms of the EU.

The Commission had rejected the proposed budget of the Italian government because it claimed that the proposed fiscal deficit by the populist coalition government of Italy was more than the last year’s budget proposal and the EU fiscal norms mandate every member state should strive to sequentially reduce fiscal deficit until a balanced budget is reached.

But the newly elected Italian government refused to budge and reduce the proposed government spending for the next year.

One of the major reasons behind the objections of the EU to the budget spending is the fact that the debt of the country is huge and stands at over £2trillion (€2.3trillion). The new coalition government still wants to increase government spending on welfare projects, pensions and the imposition of a minimum income for the unemployed.

The Italian government is adamant about not altering the proposed budget deficit target of the country which stands at 2.4 per cent for 2019 which has become necessary for the government to fulfil the election promises made by the ruling parties. .

The EC had set a deadline of Tuesday for Italy to bring in the directed the Italian government to bring in changes in its budget.

This setting up of a deadline for a member state is unprecedented for Brussels.

Italy had proposed a concessional clause to the EU over the budget and its spending plans which included a safeguard clause that would ensure that the government would not let the fiscal deficit to cross the target of 2.4 per cent for he next year. A pledge to sell off some of the state-owned assets to finance the spending was also given by the Lega and Five Star Movement coalition.

“We won’t go over 2.4 percent deficit, and we believe in 1.5 percent economic growth next year. If Brussels like our plan we’re happy; if not, we press forward,” Deputy prime minister Luigi Di Maio said.

“We have the conviction that this is the budget needed for the country to get going again,” he added.

Following Italy missing the deadline set for it by Brussels, the Commission now has the option of launching an “excessive deficit procedure” (EDP) against Italy as early as November 21.

Penalties amounting as high as 0.5 per cent of GDP could be imposed by the Commission against the Italy which would amount to about €9 billion for Italy.

Only Greece has a higher amount of debt than Italy within the EU with debt to GDP ratio at about 132 percent. During the budget plan for last year, the then Italian government had set a fiscal deficit target at 1.6 per cent and pledged to reduce it to 0.9 per cent and 0.2 per cent in the subsequent years. .

(Adapted from


Categories: Economy & Finance, Geopolitics, Regulations & Legal, Strategy, Sustainability, Uncategorized

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