Monday , March 1 2021

"Let's start at 2.4 percent and finish there"



Italian Deputy Prime Minister Luigi Di Maio looks confidently. Is there a frontal collision with Brussels? "We want to sit down at the table and explain well what our intention is". Does anyone who is not directly connected with the government draws attention that the government will have the budget for next year? Our values ​​are right, says Di Maio, leader of the five-star populist movement. The Italian government is not pumping, he says, but building: "This budget establishes the bases for changes that will become visible in 2019. More work, less poverty."

On Tuesday, Rome must respond to the harsh letter with which the European Commission last month found that Italy does not adhere to previous agreements to further reduce the budget deficit. Brussels demands changes. In a conversation with foreign journalists last Friday, Di Maio first said: we did not change anything. And then: "But …"

What does not change is the intention to raise the budget deficit to 2.4% of gross domestic product. In accordance with the multiannual agreements of previous cabinets with Brussels, the deficit should fall to 0.8 percent. The two coalition parties want to spend extra money on two major election promises: the previous retirement and the introduction of a form of assistance.

At least three times May says imploring that this 2.4 percent is a higher limit. "It's the maximum. Let's emphasize that in the dialogue with the EU. In the past, we had cabinets that charged a deficit of 1.8 percent and stood at 3 percent. No one said anything about it. We say: we started at 2.4 percent And we ended there. "

Read the question: What can now be done now that the Italian budget "differs significantly"?

To emphasize that, says Di Maio, the government will also inform the European Commission about the measures it will take if the shortage threatens to become higher.

That is a first guide. He also asks for understanding: "We've only been working for five months." Next year there will be space to reduce costs, he says. "There is a lot of waste, and there are at least two hundred useless laws that will be abolished. All this will stimulate growth."

The riots on the cabinet plans in the financial markets led to an increase in the interest rate that the Italian government has to pay for the huge sovereign debt of 131 percent of GDP. Now Rome pays about three percentage points more interest than Berlin. This expansion (unlike interest rates) was still below 1.8 percentage points this spring. The vice president-general of the Italian Central Bank said during the debate on the parliamentary budget, which continues this week, that this has already led to an increase in costs of 1,500 million euros. If it stays that way, it will cost 5,000 million next year and 9,000 million by 2020.

"People's budget"

Di Mayo and his political ally, Matteo Salvini, leader of the Lega anti-immigration party and also deputy prime minister, previously dismissed high-ranking warnings as harassment attempts by an international political and financial elite that does not see anything in this "popular budget". Say May now choose a different tone. "The spread will fall once we prepare our plans" for reform and assistance to pensions. For this, seven and ten million euros respectively were reserved in the budget, but how and what has not yet been completed. A number of Italians have already calculated for themselves that it is not advantageous to withdraw if they worked for 62 years and paid pension contributions to the state for 38 years, as proposed by the Council of Ministers. And about the assistance with the obligation to apply, Di Maio says: "We reserve nine billion euros for that reason in the budget for three years, but I do not think that this total amount is needed every year."

Despite the fascinating tone, many Italians with savings do not feel comfortable with it. What if the cabinet did not go financially? The memories of the night from the 9th to the 10th of July 1992 are still alive. The then cabinet, still in intense time, decided to increase 6% of all bank accounts to cover the need. Swiss banks say more and more Italians are opening an account to get their money.

Minister of Economy and Finance Giovanni Tria, a non-partisan professor who tries to mediate between Salvini and Di Maio, on the one hand, and the European Commission, on the other, awaits the understanding in Brussels. Italy did not grow at all in the third semester. If we had to do what Brussels required and point to a 0.8% deficit, "with an economy that is slowing down, that would be suicide," he said at the end of last week.

In a brief conversation, economist Carlo Cottarelli, a cabinet critic and briefly in May as a possible prime minister. "I am not so afraid of the reaction of Brussels. In the end, the Commission does not have so many weapons. What I fear much more is the reaction of the markets. The spread has already increased. It will be difficult to follow an expansive policy with the additional costs that it implies a higher rate of interest ".

Conversations in the Eurogroup on more were difficult at the beginning of this month. Read also: Italy wants to be uncomfortable as long as possible


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