EU slams Italy bud­get plans “

Viet Nam News - - WORLD -

MI­LAN — The Euro­pean Union yes­ter­day is­sued a stern warn­ing to Italy’s pop­ulist lead­ers fol­low­ing their de­fi­ant pledge to in­crease spend­ing and run a bud­get deficit that risks putting Rome on a col­li­sion course with Brus­sels.

Thurs­day’s deal on a 2.4 per cent deficit for the next three years came af­ter warn­ings from the Euro­pean Com­mis­sion — the EU’s ex­ec­u­tive arm — to hold the reins on spend­ing.

It vastly ex­ceeds the 0.8 per cent fore­cast by the pre­vi­ous, cen­tre-left gov­ern­ment, and comes dan­ger­ously close to the EU rule say­ing that gov­ern­ment deficits can­not ex­ceed 3.0 per cent of gross do­mes­tic prod­uct (GDP).

Cru­cially, it will in­flate the coun­try’s al­ready mam­moth debt bur­den - cur­rently 131 per cent of GDP, the big­gest in the eu­ro­zone af­ter Greece and way above the 60 per cent EU ceil­ing.

In morn­ing trade yes­ter­day the Mi­lan stock ex­change plunged, drop­ping by 2.5 per cent, as jit­tery in­vestors dumped shares while the yield on Ital­ian gov­ern­ment bonds shot up above the sym­bolic 3.0 per cent thresh­old.

“It is a bud­get which ap­pears to be be­yond the lim­its of our shared rules,” said Pierre Moscovici, who runs the Euro­pean Com­mis­sion’s eco­nomic

It is a bud­get which ap­pears to be be­yond the lim­its of our shared rules.” PIERRE MOSCOVICI EURO­PEAN COM­MIS­SION’S

and fi­nance port­fo­lio.

“If you al­low pub­lic debt to in­crease you cre­ate a sit­u­a­tion that be­comes un­sta­ble as soon as the eco­nomic con­text wors­ens,” he added.

Italy does in­deed face a lack­lus­tre growth fore­cast: just 1.0 per cent in 2019 ac­cord­ing to the Bank of Italy and the In­ter­na­tional Mon­e­tary Fund (IMF), and 1.1 per cent ac­cord­ing to the Euro­pean Com­mis­sion.

The bud­get de­ci­sion fol­lows weeks of sus­pense over whether Western Europe’s first anti-es­tab­lish­ment lead­er­ship would defy Brus­sels and up­hold its costly elec­toral prom­ises to in­crease pub­lic spend­ing af­ter years of aus­ter­ity.

Italy’s joint deputy prime min­is­ters Mat­teo Salvini and Luigi Di Miao wel­comed the deal, se­cured at the last minute in a vic­tory over the coun­try’s more cau­tious fi­nance min­is­ter, say­ing: “We’re sat­is­fied, this is the bud­get of change.”

Fi­nance Min­is­ter Gio­vanni Tria, an in­de­pen­dent, had at­tempted to set an up­per deficit limit of 1.6 per cent but was forced to back down.

His ca­pit­u­la­tion came just hours af­ter ru­mours he would be pushed out if he re­fused to play ball.

An­a­lysts said that by keep­ing the deficit be­low the EU’s 3.0 per cent limit, Italy may have es­chewed trig­ger­ing an all-out eu­ro­zone cri­sis — for now.

“As long as Italy does not breach the 3.0 per cent limit, the EU will likely ad­mon­ish Italy with­out im­pos­ing a fine that could trig­ger an anti-Euro­pean back­lash in Italy,” said Hol­ger Sch­mied­ing, chief econ­o­mist at Beren­berg Bank.

“An Ital­ian debt cri­sis re­mains an ac­ci­dent wait­ing to hap­pen,” he added.

In a mes­sage on Face­book, Di Maio cel­e­brated the deal on Thurs­day, post­ing: “To­day is a his­toric day! To­day Italy changes! For the first time the state is on the peo­ple’s side. For the first time it is not tak­ing away, but giv­ing.” — AFP

Newspapers in English

Newspapers from Viet Nam

© PressReader. All rights reserved.