While the Italian government is raising the prospect of a major confrontation with Brussels over the fiscal compact, they are still taking measures that would help avoid further destabilisation of the euro.
Italy is willing to take fiscal consolidation measures that would amount to €5.2 billion in its 2019 budget, part of a last-ditch effort to avoid a confrontation.
Prime Minister Giuseppe Conte committed the government to dialogue with Brussels but said Italy will remain resolute in sticking by its own economic policy. Addressing the parliament, Conte said a new economic strategy is needed and one that “no longer sees growth as being in contrast with stability or solidarity in contrast with responsibility.”
In no uncertain terms, Conte said that Italy is ready to challenge the fiscal compact, calling on the EU to strike a balance “between stability and growth and the reduction of risks and the sharing of risks.”
In a resolution passed by 287 in favour and 188 against, the Italian parliament is calling for the exclusion of “the exclusion of productive investments, including those in human capital” from deficit calculations. This is not the first Italian government to make similar demands.
Framing the challenge as a battle between EU member states, Deputy Prime Minister Matteo Salvini took to Facebook to argue that the EU’s budget rules were “good for France and Germany, but bad for everyone else.”
“Some European rules, some limits, were designed to help some people in Berlin and Paris and to swindle all the others,” said Salvini.
Earlier in June, the Italian parliament passed legislation that would theoretically allow the issue of a parallel currency known as minibots to the euro.
Economy Minister Giovanni Tria, has questioned the necessity and legality of the measure, Salvini warned on Tuesday that “Tria is our minister and he will advance the programme of the whole government”, including tax cuts.
Lega’s economy spokesperson Claudio Borghi made clear that in his view Tria “doesn’t understand” the need for minibots, which is “a sort of cryptocurrency to be used to repay State debts to private companies.”
Meanwhile, the space for fiscal consolidation measures in Italy may be limited. According to data released by Italy’s national statistical service, about 7% of Italians live in “absolute poverty”, the highest level since 2005.
A lack of employment was a major source of poverty, but Italy is also challenged by one of the weakest rates of wage growth in the eurozone.