The European Commission has rejected, on Tuesday, October 23, the budget forecast of Italy for 2019. An unprecedented decision that revives tensions between Brussels and the Italian government. The populist leaders have said they want to maintain their budget despite the rejection of Brussels.
The standoff between the European Commission and the populist coalition in power in Italy hardens: Brussels rejected Tuesday, October 23, the Italian draft budget, a first in its history, lambasting "a deviation clear, clear, assumed and by some , claimed " to the European rules.
The leaders of the League (far right) and the 5-star movement (populist), Matteo Salvini and Luigi Di Maio, have assured to want to maintain their budget proposal despite the rejection of Brussels. "It does not change anything, that these gentlemen of speculation reassure themselves, we do not go back," said Matteo Salvini.
"This is a very important moment for us," said EU Economic Affairs Commissioner Pierre Moscovici at a press conference in Strasbourg. According to European rules, Italy has three weeks to submit a revised budget.
A risk of financial sanctions
If it does not present a new budget under three weeks, Italy is exposed to the opening of an "excessive deficit procedure" , likely to lead to financial penalties corresponding, in theory, to 0.2% of its GDP (ie 3.4 billion euros taking the figures of 2017). Vice-President Valdis Dombrovskis regrets that Rome is "openly, consciously against the commitments made" .
The Commission is walking on a line with Italy, looking for firmness, in order to prove its credibility, and willingness to play down, to avoid a frontal shock with Rome that would frighten the markets and risk fueling populism in the third economy. the euro zone.
"They are not attacking a government but a people. These are things that make Italians even more angry, " responded the boss of the League (far right) Matteo Salvini, strongman of the coalition government with the 5-star movement (M5S, populist).
"Tomorrow, we will continue to explain this finance law , " said for his part, before the announcement of the Commission, his counterpart, Luigi Di Maio, leader of the M5S, promising "weeks of great dialogue with Europe, the markets " .
An unprecedented fiscal slippage
Brussels had already pointed out in a letter to Rome last week Italy's "unprecedented" fiscal slippage since the new rules put in place in 2013 and the risk of "serious non-compliance" of its budget with the rules. European.
But despite these criticisms, the Italian government had maintained its forecasts for Monday, October 22. While the previous center-left government had promised a public deficit of 0.8% of GDP in 2019, Rome now plans to reach 2.4 % next year, then 2.1% in 2020 and 1.8% in 2021.
As for the public debt, currently at around 131% of GDP, the highest ratio in the eurozone after Greece, Rome has promised to reduce it to 126.5% by 2021.
As a pledge of goodwill, the Italian government has ensured that it will strictly adhere to these objectives without further widening the deficit or the debt. He also reaffirmed Monday his commitment to the EU and the euro area, ensuring that there was "no chance" that Italy will end.
"Italy is not the next Greece"
Trade between Rome and the Commission is closely watched by the other euro area countries, subject to the same budgetary rules as Italy.
"No one can get away from these rules, which are the same for everyone," recalled the French Finance Minister Bruno Le Maire, who traveled to Strasbourg before the Brussels decision. Klaus Regling, Head of the European Mechanism Stability Mechanism (ES), an EU organization tasked with helping struggling eurozone countries, assured him on Tuesday that Italy was "not the next Greece" . "Do not panic [...] The risk of contagion to other countries is very limited," he said.