Italy defies EC and stands firm on spending plans

15 Nov 18

The Italian government has decided to go ahead with its controversial big spending plans, despite being told by Brussels to revise the draft budget.

Deputy prime minister Matteo Salvini said a deficit target of 2.4% and a growth forecast of 1.5% were unchanged from the original budget plans.

The European Commission raised concerns about this three weeks ago because of Rome’s rising debt, which stands at more than 130% of GDP and is the second largest in the EU, after Greece.

It told Italy to revise the budget or face possible fines. The deadline for the government to respond was yesterday.

Brussels now has to decide whether to begin disciplinary measures against the Italian government.

The Commission’s warning was the first time Brussels has told a member state to revise its spending plans.

In the summer, Italy had committed to reducing its high debt levels and set a target deficit of 0.8% of GDP. But the draft budget sets out a deficit three times higher.

This is to cover a number of  spending promises made to “end poverty” with a minimum income for the unemployed, along with tax cuts and scrapping extensions to the retirement age.

In a letter despatched to Brussels last month, Italy 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 Five Star Movement. It has promised to bring in both tax cuts and higher spending on social welfare, including pensions and unemployment benefits.

Brussels also flagged concerns last month about France’s spending plans, warning in a letter that the planned debt reduction in 2019 does not respect the EU’s proposals.

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