Italy now has three weeks to submit a new draft budget to Brussels.
Pierre Moscovici, commissioner for economic and financial affairs, taxation and customs, said: “The opinion adopted [on Tuesday] by the commission should come as no surprise to anyone, as the Italian government's draft budget represents a clear and intentional deviation from the commitments made by Italy last July.
“However, our door is not closing: we wish to continue our constructive dialogue with the Italian authorities.”
With regret, @EU_Commission has no alternative but to request #Italy to revise its draft budget plan for 2019. We are entrusted by Member States to uphold mutual commitments and common interest of the euro area. This is our duty. My press remarks: https://t.co/unIkxY30AC pic.twitter.com/UyXaSuFzOh
— Valdis Dombrovskis (@VDombrovskis) 23 October 2018
This is the first time the commission has ordered a member state to rethink its spending plans.
In the summer, Italy had committed to reducing its high debt levels and target a deficit of 0.8% of GDP. But the draft budget sets out a deficit three times higher, at 2.4% of GDP.
Italy’s debt stands at more than 130% of GDP and is the second largest in the EU, after Greece. Its economy is also still smaller than it was in 2008, before the financial crash.
In response to Brussels decision, Italy’s deputy prime minister Luigi Di Maio said on Twitter: “This is the first Italian budget that the EU doesn’t like. No surprise: This is the first Italian budget written in Rome and not in Brussels!”
È la prima manovra italiana che non piace alla UE. Non mi meraviglio: è la prima manovra italiana che viene scritta a Roma e non a Bruxelles! https://t.co/HC4tviLwK3
— Luigi Di Maio (@luigidimaio) 23 October 2018
In a letter despatched to Brussels earlier this week, it also defended its high spending plans saying they would be in the interest of the “entire European economy”.
The current Italian government is a coalition between populist parties The League and The 5-Star Movement. It has promised to bring in both tax cuts and higher spending on social welfare including pensions and unemployment benefits.
Last week, Brussels also flagged concerns about France’s spending plans, warning in a letter, that the planned debt reduction in 2019 does not respect the EU’s proposals.
