The European Commission took the first step on Wednesday toward disciplining Italy over its expansionary 2019 budget after Rome refused to change it, raising the stakes in a dispute that has alarmed the whole euro zone and could eventually lead to fines. And speaking afterwards, Paolo Savona, Minister of European Affairs, insisted: “We cannot go on like this anymore, it does not make sense. The budget is no longer good: it has to be rewritten.” Mr Savona, who was speaking at the launch of a book entitled Globalisation, governance asymmetry, written by his friend Giancarlo Elia Valori, said the European Union was struggling in the face of “strong internal turbulence”.
He also told newspaper Corriere della Sera there was a growing perception among figures within the Government that “we will not hold up for long”.
At a budget meeting yesterday, the European Commission said said the Italian draft budget increased the 2019 structural deficit, which excludes one-offs and business cycle swings, by one percent of gross domestic product rather than cut it by 0.6 percent as required by EU laws.
Italy also would not trim its huge debt in a “a particularly serious case of non-compliance” with the rules, the Commission said, warranting the launch of an excessive deficit procedure.
Italy’s debt, at 131 percent of GDP, is proportionally the second highest in the euro zone after Greece’s. Under EU rules it should be falling every year towards 60 percent, but the Commission said it would be stable for the next two years.
Commission Vice President Valdis Dombrovskis said: “The opening of a debt-based excessive deficit procedure is thus warranted.
“In a situation of very high debt, Italy is essentially planning significant additional borrowing, instead of the necessary fiscal prudence.
“The impact of this budget on growth is likely to be negative in our view.
“It does not contain significant measures to boost potential growth, possibly the opposite.”
Dombrovskis said: “With what the Italian government has put on the table, we see a risk of the country sleepwalking into instability.”
Speaking in Rome, Mr Salvini, leading of the right-wing Lega party, remained defiant, insisting: “We are convinced about the numbers in our budget.
Mr Salvini, who previously said “not one comma” of the budget would be altered, said fines against Italy would be “disrespectful”.
Italian Prime Minister Giuseppe Conte, scheduled to meet Commission President Jean-Claude Juncker on Saturday, said yesterday that the government was convinced the budget was excellent and in the interest of Italy and Europe.
Economy Minister Giovanni Tria and Deputy Prime Minister Luigi Di Maio also made some conciliatory remarks that Rome and the EU had the same objectives and would seek a shared solution.
Writing on Facebook, Mr Di Maio said: “We want the same thing: to reduce the debt.”
Mr Tria said Italy believed the “moderately expansionary” budget was needed to counter a slowdown in the economy and that he would “continue dialogue with the Commission to seek a shared solution in our mutual interests”.
Also speaking to Courier della Sera after yesterday’s meeting, European Union Economics Commissioner Pierre Moscovici said talks over the budget dialogue were
“imperative not optional”.
“Reciprocal respect was necessary” while irony was “out of place”, he added, in remarks possibly aimed at Mr Salvini’s combative stance.
(Additional reporting by Maria Ortega)