EU May Sanction Italy Over Budget if Deal Not Reached - EU Commissioner

Marco Green
November 8, 2018

The discussion comes as Italy is asked to submit revised spending plans by November 13, after the European Commission essentially rejected the country's budget for 2019, saying that it constitutes a clear deviation from commonly agreed fiscal rules.

According to several sources, the 19 ministers of the euro zone (the Eurogroup) should generally support the Brussels approach, which rejected the Italian draft budget on 23 October, a first in its history, lambasting "a clear, clear deviation, assumed "in relation to European rules".

EU Economic Commissioner Pierre Moscovici said the Commission would wait until Nov 13 before deciding on any disciplinary action against Italy over the budget, hoping Rome would change the higher borrowing assumptions.

Italy's growth is down, its unemployment up and its debt colossal.

Eurozone finance ministers are meeting for the first time since the European Commission rejected Rome's 2019 budget in a historic move.

"Everyone is anxious", a senior European Union official said, as several sources told AFP most of the 19 ministers would back the Commission's tough stance.

German Finance Minister Olaf Scholz says a nation like Italy with debt worth 130 percent of GDP "has to proceed far more cautiously" and that euro-region members must follow similar budget strategies to foster financial stability.

In an interview with Bloomberg TV, European Commission Vice President Valdis Dombrovskis cited the risk that Italy's economy might "slow even further" under the current plan.

The situation is reminiscent of the Greek debt crisis, except with Italy's much bigger and more central eurozone economy at the heart of the storm, the size of the bailout would be so large as to make it virtually impossible.

Deputy Prime Minister Matteo Salvini, head of the League, responded by calling on his supporters to demonstrate on 8 December in Rome, to say "peacefully" to the "Gentlemen of Brussels: let us work, live and breathe".

"No, we're not negotiating". We're not in a discussion.

"We look forward for Italy and the commission to engage in an open and constructive dialogue and for Italy to cooperate closely with the commission in the preparation of a revised budgetary plan", their statement said.

Italy already owes 2.3 trillion euros ($2.6 trillion), a sum equivalent to 131 percent of its GDP, and even if Brussels fails to punish Rome, many assume the markets will.

The EU commissioner stressed that sanctions were always a "failure" and suggested proceeding "step by step".

Italy's populist government does not seem to want to play by European Union rules on running a national budget and ratings agencies could send shockwaves through teetering Italian banks by downgrading the country's credit score.

But Italian Finance Minister Giovanni Tria remained steadfast, promising an explanation of its plans to the commission but saying Rome would not abandon its spending boost, that he assured would deliver growth.

Other reports by Click Lancashire

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