Friday, 16 November, 2018

EU- Italy budget clash probably unavoidable as deadline nears

08 Nov 2018, 22:09 ( 7 days ago)

DF-Xinhua Report
Italian Minister of Finance Giovanni Tria arrives at a euro zone finance ministers meeting in Brussels, Belgium, Nov. 5, 2018. Photo Xinhua.

Italian government officials say they have no plans to deviate from their collision course with the European Union (EU) over the country's 2019 budget, something analysts said would likely lead to economic fines balanced by possible political gains.

   Last month, Italy submitted a draft budget for next year with a deficit equivalent to of 2.4 percent of the country's gross domestic product (GDP), three times more than outlined in guidance from the European Commission, the EU's executive. The commission gave Italy until Nov. 13 to resubmit a draft budget with a smaller deficit.

   With the clock ticking toward the deadline, Italy has given no indication it planned to back down.

   On Thursday, Italian Minister of Finance Giovanni Tria issued a statement saying European officials failed to understand Italy's reasons for the larger-than-expected deficit, which the government has said will help spark economic growth.

   Tria stated the commission's views "derive from an inadequate and partial analysis" of the draft budget, even though Italy provided all the information needed to reach a different conclusion. Tria said that "the Italian Parliament authorized a maximum deficit of 2.4 percent (of GDP) for the 2019 budget" and that "the government is obligated to respect that."

   Two days before Tria's statement, Pierre Moscovici, European Commissioner for Financial and Economic Affairs, cautioned Italy was going too far with its deficit plans.

   "It is one thing to be flexible and another thing to disregard the rules," Moscovici told reporters in Brussels. "Our flexibility has always been in evidence, especially for Italy. But there are limits."

   Riccardo Puglisi, a political economist with the University of Pavia, told Xinhua a clash between Rome and Brussels was probably unavoidable.

   "Neither side wants to blink first," Puglisi said. "It looks like Italy will ignore guidance and will then be forced to pay fines from the commission."

   Puglisi said the government, headed by Prime Minister Giuseppe Conte and backed by the country's two main populist political parties, is likely banking on the political benefits of standing up to the European Commission, which will outweigh whatever sanctions the commission would impose.

   "Elections for the European Parliament will take place in six months," he said. "Neither of the parties in power want to be seen as the one that backed down when pressed by the European Commission."

   Several of the aspects of the 2019 budget plan have raised eyebrows, including the establishment of a guaranteed minimum income for Italian citizens and a flat tax on income.

   But one part of the budget attracting attention involves an unusual incentive aimed at helping reverse Italy's declining birthrate, the lowest in Europe. The plan would loan Italian couples who have a third child before 2021 farmland, cost free, for 20 years. It would also provide interest-free loans of up to 200,000 euros to help those families purchase homes near the farmland.

   Critics of the plan say it is unlikely to work, and even if it proves effective, it recalls controversial policies promoted by Benito Mussolini's fascist governments to increase the country's population in the 1920s and 1930s.

   "Until the 1990s, speaking about the country's birth rate was a taboo topic in Italy because it reminded everyone of Mussolini," Maria Silvana Salvini, a professor of demographics at the University of Florence, told Xinhua.

   "More importantly, there is no way this kind of plan will work. Italy is now a post-industrial economy. A government can't convince modern families to have one or two extra children by trying to turn them into farmers." 

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