Speaking in the European Parliament Committee on Economic and Monetary Affairs (ECON) on May 17, European Commission Vice-President Valdis Dombrovskis reiterated the need for Italy to stick to its fiscal discipline and keep reducing the country’s public debt.
“I don’t comment on the policies of parties or the processes of forming governments, but what I emphasise is that it is important to abide by budget discipline and, especially for Italy, to continue to reduce the deficit and debt because these are risk factors,” Dombrovskis told MEPs. “We are discussing the trajectory of the accounts with the Italian authorities and, in reality, this is also a message for the new government – it is important to stay on track,” by cutting its deficit and debt. “This is an important risk factor and a drag on the economy.”
Dombrovskis reiterated that the new Italian government will be expected to fully comply with the EU’s budget rules, “this is our message to the new government. It’s important to stay the course”.
Touching on the issue of Greece, Dombrovskis suggested that reaching a final agreement on Athens’ exit from the European Stability Mechanism is feasible by the next meeting of the Eurogroup as both creditors and the Commission are working on finalising everything within the next month.
This is a critical period for Athens after successfully surpassing fiscal targets last year, but negotiations for the latest evaluation have just begun.
“It’s clear from the commitment by all sides that a successful conclusion of the program is near,” said Dombrovskis, who also noted that certain pre-requisites and other pending issues, including debt measures, remain but the negotiations on debt relief are still a work in progress as it depends on Greece’s adherence to deep reform targets.
The guidelines agreed with the Eurogroup do not include a nominal haircut, but will instead be based on a service arrangement that will be followed for debt. “The Commission is fully committed to this agreement before the end of the program”. With regard to the IMF, he noted that “we are working constructively”, although no funding is yet provided by the IMF during the third programme that is approaching towards its end in August.