Italy reaches budget accord as Juncker warns about EU rules
Paris, France - Italy’s fractured coalition government cobbled together a last-minute budget accord that starts delivering on costly election promises but risks a confrontation with Brussels over European Union (EU) fiscal rules.
The European Commission, which already warned Italy about earlier budget projections that had caused a selloff in Italian bonds, has a week to make an initial assessment of the draft 2019 budget that Italy submitted overnight. The EU’s executive branch has to balance enforcing the rules without further stoking populist resentment.
‘If we accepted a slippage’ away from EU rules ‘some of the other countries would cover us with insults and invective accusing us of being too flexible with Italy’, European Commission president Jean-Claude Juncker told Italian journalists on Tuesday in Brussels.
The agreement reached after meetings throughout Monday afternoon and then an evening gathering of the full Cabinet had been held up by the conflicting electoral promises of Deputy Prime Minister Matteo Salvini’s League and the Five Star Movement of fellow deputy Prime Minister and coalition partner Luigi Di Maio.
“This budget doesn’t accom- plish miracles, it doesn’t multiply fish and bread, but it opens opportunities to work for hundreds of thousands of youths,” Salvini said in on Monday evening news conference flanked by Prime Minister Giuseppe Conte, Di Maio, and Finance Minister Giovanni Tria. “After 137 days of governing, I think we can be satisfied with what we’ve done.”
Tria said he expects ‘continued dialogue’ with the commission over Italy’s plans to increase next year’s budget deficit to 2.4 per cent, which he said was needed to lift Italy’s slowing economy. While the shortfall is much wider than the 0.8 per cent targeted by the center-left government swept out of power in the March elections, Tria said the deficit was already trending toward two per cent because of slowing growth.
“Our deficit would be considered normal in all Western democracies, not explosive,” Tria said at the news conference. He also denied reports that he’d quit once the budget was approved by parliament. Di Maio, who has clashed with Tria over spending, said on Monday evening ‘you don’t change a winning team’.
According to the draft submitted to Brussels, growth next year will rebound to 1.5 per cent from 1.2 per cent this year; growth next year would have been just 0.9 per cent without the expansionary effect of the budget. The unemployment rate is seen falling to 9.8 per cent from 10.6 per cent, which if confirmed would be the first time since 2012 it’s below ten per cent.