EU Commission calls for Italy to be sanctioned over budget

The proposed budget deficit target for 2019 that was prepared by the newly elected coalition government of Italy had been rejected by the European Commission and had asked the country to submit a fresh proposal within a period three weeks. This was the first such rejection in the history of eth European Union.

The Commission, which is the executive arm of the EU and entrusted with the task of supervising national budget plans of member countries has asked other members countries to review its assessment in the next two weeks. An “excessive deficit procedure”, which could end up in the Commission imposing fines for Italy, could be launched if the member countries agree to the measures by the EU.

There has been tension between the Commission and Italy’s populist government because of the warning which is however not rare in EU terms. Italy has strongly stated that it would resist any pressure from Brussels and would go on with its plan for spending.

“It is with regret that today we confirm our assessment that Italy’s draft budget plan is in particularly serious non-compliance,” EU Commission Vice-President Valdis Dombrovskis told reporters.

“The situation in Italy is of common concern. Euro area countries are in the same team and should be playing by the same rules. These rules are here to protect us, to provide certainty, stability and mutual trust.”

The launching of an excessive deficit procedure is “warranted”, he said.

Even though there is no precedence of fines being imposed on any eurozone country over such an issue, Italy could be fined this time around.

The Commission has the power to launch sanctions against eurozone countries that either breach or are on the verge of breaching the pre-set budget deficit benchmark of 3 per cent of GDP or countries violate the EU debt regulation of not having a government debt level of more than 60 per cent.

“We cannot see how perpetuating this vulnerability will increase economic serenity,” Dombrovskis said. “Instead, I believe it could result in more austerity down the road.”

Italy has the second highest debt burden in Europe after Greece. There are also concerns among analysts of a possible financial turmoil in Europe if the spending of Italy went out of control with its spending.

The economy of Italy is the third largest in the eurozone. For the EU, it was a huge pain to bail out Greece, which has a smaller economy compared to Italy, and therefore if there is a situation to bail out the Italian economy, it would be quite a problem for the EU. Many analysts believe that it could be next to impossible for the EU to do a bail out for Italy.

While the Italian government has claimed that the additional spending that it plans to do would boost the ailing economy, the analysis of the Commission claims that the spending would not be able to boost growth in the Italian economy but instead would force the country to make greater budget cuts in the future.

“This step which we take today is the logical and unavoidable consequence of the decision taken by Italy’s authorities not to modify their fiscal targets,” said EU Economy Commissioner Pierre Moscovici.

(Adapted from


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

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

This site uses Akismet to reduce spam. Learn how your comment data is processed.

%d bloggers like this: