Despite pressure from Brussels, the Italian budget "has not changed"


Luigi Di Maio, Deputy Prime Minister and leader of the 5-star Movement (M5S, antisystem), on November 13 in Rome.
Luigi Di Maio, Deputy Prime Minister and leader of the 5-star Movement (M5S, antisystem), on November 13 in Rome. Andrew Medichini / AP

The Italian people's government, which was summoned by the European Commission to review its budget for 2019 before Tuesday, November 14, insisted at night that it did not intend to surrender, taking the risk of financial sanctions, its implementation remains quite hypothetical. "The budget has not changed, both on the balance sheet and in the growth forecast. We are confident that this budget is one that the state needs to do again"said Luigi Di Maio, deputy prime minister and leader of the 5 star movement (M5S, antisystem).

"Our goal is to maintain a deficit of 2.4% of GDP, and we are committed to maintaining it"he added to the press after the ministerial council and a meeting with allies Matteo Salvini, the league boss (far right) and head of government, Giuseppe Conte. "We are working on a budget that guarantees more work, more pension rights and less tax (…). If it is more in line with Europe, if it is not in line with Europe, we continue it"said Mr. Salvini, arrived at this meeting.

Also read Italian budget rejection: what is the risk of Italy Salvini?

Over-rated growth?

For the government, the anti-austerity budget will relaunch slack growth and thereby reduce the public deficit and the country's large public debt. But for the first time in EU history, Brussels authorities refused on October 23 this Italian draft budget. Supported by the entire euro area, they remain deaf to Italian arguments, which promise a deficit of 2.4% of Gross Domestic Product (GDP) in 2019 and 2.1% in 2020.

According to the Commission, the estimated steps in the budget could push the deficit to 2.9% next year and 3.1% by 2020. Especially because it estimates 1.2% growth, while Rome relies on 1.5%.

In a report released Tuesday afternoon, the International Monetary Fund (IMF) even reiterated its estimate of 1% growth in Italy in 2020 and was skeptical of reforms announced by the government. "The focus of authority on social growth and inclusion is welcomed"said the fund, but estimates are currently expected to keep public debt around 130% of GDP for the next three years.

According to Italian media, Economy Minister Giovanni Tria is expected to send a letter to Brussels in the coming hours to explain the government's decision, accompanied by a presentation of the structural reform plan and the government's investment plan. .

"Excessive deficit procedures"

By refusing to change his budget, Rome was faced with the opening a "Excessive deficit procedures", tends to lead to financial sanctions that correspond to 0.2% of its GDP (around 3.4 billion euros).

In front of the European Parliament in Strasbourg, German Chancellor Angela Merkel repeated that the European Union wanted it "Reach" to Italy, the founding country of the union. "Italy has also adopted many rules that we both have now"he remembered. "I hope a solution can be found". The European Commissioner for Economic Affairs, Pierre Moscovici, has also doubled the call for dialogue, hoping to reach "Compromise".

Hold on to Europeans

According to Lorenzo Codogno, founder of LC Macro Advisors, Italy must be in a procedure of excessive deficits (EDP) "At the end of January", but a period of three to six months to prepare a plan for correction "Will enable Italy to reach European elections without a hitch". then "Nothing will happen until the new Commission exists" in the autumn of 2019.

According to Mr. Codogno, the lack of rapid action at the European level, financial markets will, "As always, the guardian of true budget discipline".

Since mid-May, the date for the discussion of the formation of a popular coalition, the spread, the closely watched gap between the Italian and German loan rates, has doubled, now oscillating around 300 points. According to the Bank of Italy, this represents an additional fee of 1.5 billion euros in interest for six months.

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