European Commission Günther Oettinger has signalled his intention to get tough, suggesting inaction on the matter was not a option. He fears there will be an uprising from eurozone members if Brussels does not take a stand. Italy’s ruling coalition, a partnership between Matteo Salvini’s Lega and Luigi Di Maio’s Five Star Movement has defied Eurocrats with a budget representing a spend of 2.4 percent of GDP next year.
The figure would equate to just over €44billion, which Brussels fears will simply push the country’s €2.5trillion national debt – which represents 131 percent of the country’s GDP – still higher.
The European Commission, which rejected the budget plans in October, is today due to publish its views on the drafts of all the 19 countries sharing the euro, including that of Italy’s eurosceptic government. Wording has been revised only slightly since then – and nothing like enough to satisfy Mr Oettinger.
He told Politico: “If we do nothing at all Wednesday, it will certainly not contribute to progress.
“Then the Balts, the Dutch, the Danes – even some Germans – will say that a European deposit insurance scheme is not feasible, that the banking union, the transformation of the ESM into a European Monetary Fund, and the backstop are not feasible.”
The so-called 126(3) report will say Italy is at “serious” risk of non-compliance with the EU’s debt rules, Politico said.
The report will single out Italy as being in breach of the EU law which says public debt cannot be higher than 60 percent of GDP, or, if it is, has to be falling towards 60 percent at a satisfactory pace.
After today, member states will then have a fortnight to examine this document and if they agree with its findings, the Commission would then be empowered to launch an excessive defunct procedure, possible as early in December, which could lead to possible freezing of EU cash.
The European Council, consisting of the heads of state or government of the member states, would then need to sign off on such measures, with Italy getting between three and six months to take action.
Italy says expansionary measures and high levels of public spending are needed to head off an economic slowdown affecting the whole of Europe.
Economy Minister Giovanni Tria says France – whose national debt represents 97 percent of its GDP – has been given greater leeway than Italy on its budget in recent years, and has pointed out that Italy’s “primary balance”, excluding debt-servicing costs, has been in surplus for almost 20 years.
Italy’s leaders have adopted a bullish stance in the face of the criticism of their budget plans.
Speaking last month, Mr Salvini said: “As we are polite, we open the little letters from Brussels, we read them, we respond to them.
“They write back and we respond, but we are not changing a comma of the budget.
“If Brussels or some big professors want Italy at zero growth, they have run into the wrong government and the wrong minister.”
Speaking this morning, Mr Salvini reiterated his position, saying he was open to dialogue about investments “but not on the budget deficit or pension reform,”
Earlier this week, Mr Di Maio claimed voters in May’s European Parliamentary elections throughout Europe would opt to punish Brussels.
He said: “Citizens will vote in the European elections and will cause a big shake up.
“We are ready to discuss things around a table, but they cannot ask us to massacre Italians.”
Italy’s Prime Minister Giuseppe Conte will be having dinner with European Commissioner Jean-Claude Juncker on Sunday, at which the subject will doubtless crop up.