Tuesday , May 18 2021

Italian budget: the Commission is ready to enter into conflict

Acting fast and strong is the attitude that the European Commission could adopt in the Italian file on November 21. Although the European tax police could have been happy to send a warning to Rome rejecting its 2019 budget project and wait until 2020 to find a posteriori serious violation of the European rules to reduce the budget deficit, it is seriously considering acting now. According to the specialized news website on European Political Affairs and the Bloomberg financial agency, it could decide to open an excessive deficit procedure against Italy, because of a very slow reduction in the huge indebtedness country that exceeds 130% of GDP. It has never been seen in the history of the euro zone.

In concrete terms, this means that financial sanctions could be decided from the beginning of next year, and even perhaps before the European elections. They could expect a 0.2%, then, in the absence of correction, up to 0.5% of GDP or about 9 billion euros.

The Commission has come to the Italian Government, I want you to take advantage of it

This would be a great step in the escalation of tensions between the European institutions and Rome. If the European Commission is thinking about adopting this very strong position, it is because it has the support – or even the pressure – of the other members of the euro area to not allow a country deliberately violating the adopted regulation jointly. . "Probably the other member states that asked for this. Jean-Claude Juncker spoke with Angela Merkel and the countries of the North call for firmness," says Credit Agricole's economic investigation of Paola Monperrus-Veroni.

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Upon arriving at the meeting of finance ministers in Brussels on Monday, French Minister of Economy and Finance, Bruno Le Maire, explained that France was not there to "give classes to anyone" "But he supported the position of Brussels." We shared the evaluation made by the European Commission [sur le budget italien]. Above all, the Commission has come to the Italian Government, I want you to take advantage of it. "

There are no mitigating circumstances

If the Commission initiates an excessive deficit procedure, it will legally rely on the rule that requires Member States to return about 3% of the deficit to regularly reduce their debt, one twentieth per annum of the difference between their debt debt and the 60's bar % of GDP. In June, he had already prepared a report that indicated, even before the presentation of the 2019 budget by the populist coalition now in power in Rome, a possible serious violation of this rule. Italy did not meet the necessary debt reduction in 2016 or 2017, nor should it meet this goal in 2018 and 2019, according to its experts. A deviation that can not be explained by an economic context considered particularly difficult in 2018-2019. Rome can no longer affirm the brave structural reforms. Italy can not take advantage of its efforts to reduce the structural deficit, that is, excluding the effect of the economic situation on government revenues. On the contrary, the new Italian government decided to put an end to it in 2019 with the hope that it will stimulate the growth through fiscal cuts and increases in the public expense … Therefore, it does not have mitigating circumstances before the eyes of Brussels.

Do not rush

As the Commission is preparing to wait for the results of the 2018 budget executed in the spring of 2019 to make a decision, the Commission could accelerate the pace. Contacted by The pointPierre Moscovici denies that the decision is made. "Do not rush. Act step by step. Hopefully they are moving, it is the interest of all," the European Commissioner for Economic and Financial Affairs infuriates. A French source confirms: "This is one of the options that exist. But at this time, no decision is made."

Italy still has a few days, until November 13, to present all the relevant factors to explain the exit of the road. But this step is largely formal as road exit is deliberate and has not suffered … Unless Italy relinquishes.

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By showing its firmness, the Commission expects the economic slowdown observed in Italy in the third quarter, where growth has been tightened, as well as pressure from investors, who are now reluctant to keep Italian debt on portfolios, brings Rome back to reason A very risky bet against the powerful vice president of the Council of Ministers of the League, Matteo Salvini and Luigi Di Maio, the 5-star Movement, which pulls the ropes of the Italian government. This could push Italy to exit the Eurozone.

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