The Italian government approved €25billion of extra spending late on Wednesday, the third major cash injection to try to support its battered economy since the start of the country’s coronavirus outbreak. But the timing of the decision was highlighted by Hans-Olaf Henkel, who did not mince his words as he lambasted the “alarming” development.
Mr Henkel, who stood down from the European Parliament last year, told Express.co.uk: “Only hours after the European Council’s agreement to help Italy with billions of euros through cheap credits and outright grants aimed at improving Italy’s competitiveness through reforms, through investments in modernised digitalisation and through improving its outdated infrastructure, the Government in Rome decided to spend billions of euros in areas which have nothing to do with ‘reforms’, ‘digitalisation’ or ‘infrastructure’.”
He explained: “Rather the Italian Government decided to allow their citizens to pay taxes at later than official dates and finance social programs such as alleviating the effects of lay-offs.”
As a result, new debts in Italy would reach 11.9percent of GDP, rather than the three percent permitted under the Maastricht Treaty, Mr Henkel pointed out.
Italy’s total debt would skyrocket to at least 157.6percent of GDP rather than the 60percent which was the maximum allowed for a country to join the euro.
Mr Henkel said: “While it is quite understandable that Governments exceed such targets in extraordinary circumstances such as in the current coronavirus crisis, Italy’s recent behavior is alarming.”
In a veiled warning to Rome, and Italian leader Giuseppe Conte, he added: “Although taxpayers in Austria, Denmark, Finland, Germany, Sweden and The Netherlands have mostly a much lower average wealth per capita than those in Italy they demonstrated solidarity with Italy nonetheless.
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He said: “I fear a new crisis for the stability of the euro system as a result.
“Greece’s debts in 2010 resulted in the first major crisis of the entire euro system.
“Those if Italy today are far bigger and consequently far more dangerous.”
Speaking after a cabinet meeting which approved the measures, a statement issued by Mr Conte’s office said: “It is essential to continue to support the productive system and the income of citizens.”
The package will help tide over Italy while it awaits more than 200 billion euros in grants and cheap loans from the European Union’s Recovery Fund.
The government has said it will present the measures in an emergency decree early in August, following a parliamentary vote on July 29 to authorise the deficit hike.
The extra cash will conditionally extend financing for temporary layoff schemes for another 18 weeks, a government source said.
The new stimulus measures come on top of €75 billion which Rome has already deployed to help businesses and families.
Overall, the government has set aside about €180 billion, including state guarantees for bank loans, though only part of this is expected to be spent.