The European Commission confirms in a statement today the “existence of a particularly serious case of non-compliance” with EU’s recommendation in Italy’s Draft Budget Plan. The Commission has “carried out a new assessment of the prima facie lack of compliance with the debt criterion The new assessment was necessary because “Italy’s fiscal plans for 2019 represent a material change in the relevant factors analysed by the Commission last May.”
The Commission also noted that (i) the fact that macroeconomic conditions, despite recently intensified downside risks, cannot be argued to explain Italy’s large gaps to compliance with the debt reduction benchmark, given nominal GDP growth above 2% since 2016; (ii) the fact that the government plans imply a marked backtracking on past growth-enhancing structural reforms, in particular the past pension reforms; and above all (iii) the identified risk of significant deviation from the recommended adjustment path towards the medium-term budgetary objective in 2018 and the particularly serious non-compliance for 2019 with the recommendation addressed to Italy by the Council on 13 July 2018, based on both the government plans and the Commission 2018 autumn forecast.
European Commission’s statement here.
European Commission Vice President Valdis Dombrovskis confirmed debt criterion should be considered as not complied and a “debt-based Excessive Deficit Procedure is thus warranted” for Italy. He emphasized that “Euro area countries are in the same team and should be playing by the same rules.” And, “these rules are there to protect us. They provide certainty, stability and mutual trust.”
Economics commissioner Pierre Moscovici tweeted that “Today is not yet the opening of an EDP. First the Member States must give their views within two weeks, then the @EU_Commission will have to prepare the procedure, including a new recommendation for Italy to correct its deficit and debt trajectory.” Also, “Our door remains open to dialogue with Italy. As we move closer to opening an Excessive Deficit Procedure, it is even more essential that the Italian authorities engage constructively with the @EU_Commission.”
