Eurozone nations put Italy’s government under immediate pressure Monday over budget proposals they said would pile more debt on its own citizens and skirt the rules of good fiscal housekeeping among the 19 nations sharing the euro.
Italy’s two populist ruling parties announced last week that they would increase spending next year, pushing the budget deficit out to 2.4 percent of GDP, past a 1.6 percent limit the government had earlier said they would observe. While still below the EU limit of 3 percent, it breaks with Italy’s recent efforts to reduce its debts, and sets up a clash with the country’s European partners.
A runaway budget deficit and massive debt load already brought Greece to the brink of bankruptcy three years ago and threatened to break up the eurozone itself. No one want the scenario to be repeated. Italy has the eurozone’s highest debt load in Europe after Greece, and financial markets fell sharply last week when the Italian government unveiled its proposals
“I cannot see how these figures can be compatible with our rules,” said EU Financial Affairs Commissioner Pierre Moscovici as he joined a meeting of eurozone finance ministers on Monday.
He said Italy’s spending plans for the next three years were “a very significant deviation from the commitment which had been taken.”
Dutch Finance minister Wopke Hoekstra said, “The signals we are getting so far are not very reassuring.” And Mario Centeno, who heads the eurozone finance meetings, said: “We all have questions about it and so we are expecting answers.”
Italy sought to reassure its partners, with Finance Minister Giovanni Tria saying they should “remain calm” and await his explanations.
The eurozone sets overall targets of 3 percent annual deficits and commits countries to move toward 60 percent overall debt. Currently, Italy’s debt stands at about 130 percent of GDP.
“I just want to be very clear, that there are rules,” said French Finance Minister Bruno Le Maire. “Rules are the same for every state, because our futures our linked. The futures of Italy, France, Germany, Spain, Luxembourg, — all the members of the eurozone — are linked.”
The Italian budget will go to the European Commission for vetting this month.
Source: The Associated Press