Italy’s budget plan for next year was found in non-compliance with the fiscal recommendation addressed to the country, the European Commission said Tuesday.
“In line with the relevant rules, the Commission has adopted an opinion that requests Italy to submit a revised draft budgetary plan within three weeks,” the Commission said in a statement.
The Commission noted that the draft budgetary plan for 2019 presents a particularly serious deviation from the European Council’s recommendation in July and is not in line with the commitments presented by Italy in its Stability Program in April.
Pointing at common interests and mutual commitments taken by the member countries, the Commission’s vice president Valdis Dombrovskis said in a statement that the euro area was built on strong bonds of trust, underpinned by rules same for everybody.
“Italy’s debt is among the highest in Europe, and Italian taxpayers spend about the same amount on it as on education.
“In this spirit, we see no alternative but to request the Italian government to revise its draft budgetary plan for 2019, and we look forward to an open and constructive dialogue in the weeks to come,” Dombrovskis said.
On Tuesday, the EU’s statistics office announced that the Italian government’s general debt stock was €2.3 trillion ($2.75 trillion) at the end of second quarter this year, with a 133.1-percent government-debt-to-GDP ratio.
‘Our door is not closing’
Commissioner Pierre Moscovici said: “The opinion adopted today by the Commission should come as no surprise to anyone, as the Italian Government’s draft budget represents a clear and intentional deviation from the commitments made by Italy last July.”
“However, our door is not closing: we wish to continue our constructive dialogue with the Italian authorities,” Moscovici said.
The Commission stated that the draft budgetary plan showed a significant deviation from the fiscal path recommended by the European Council.
“In July 2018, the Council recommended that Italy should make a structural improvement of 0.6 percent of GDP.
“The draft budgetary plan presented by Italy instead provides for a structural deterioration amounting to 0.8 percent of GDP in 2019,” it said.
“Both the fact that the draft budgetary plan provides for a fiscal expansion of close to one percent of GDP, while the Council had recommended a fiscal adjustment, and the size of the deviation [a gap of around 1.4 percent of GDP or €25 billion] are unprecedented in the history of the Stability and Growth Pact,” the Commission said.
The Commission also noted that debt-servicing costs absorb a considerably larger amount of public resources in Italy than in the rest of the euro area, taking a toll on the country’s productive spending.
“For instance, Italy’s interest expenditure stood in 2017 at around €65.5 billion or 3.8 percent of GDP, which was broadly the same amount of public resources devoted to education,” it added.