Italy faces the threat of stiff financial penalties from the European Commission as the stand-off with Brussels intensifies, after submitted only a draft budget plan for 2019 that was only slightly different from the one that the EU executive rejected last month, which the Commission said was an “unprecedented deviation” from the bloc’s Growth and Stability Pact.
“We’re working on a budget that will guarantee jobs, greater rights to pensions, and fewer taxes for many Italians. If Europe likes it, we’ll be happy. If not, we’ll plough on regardless,” said Italy’s deputy prime minister, Matteo Salvini. “I can assure you, we will not budge even one millimetre,” he said, making it evident that the anti-establishment government is in no mood to compromise.
The Italian government envisages a public deficit of 2.4% of GDP next year, dropping to 2.1% in 2020. The Commission, however, has reiterated that a debt of €2.3 trillion, at 131% of GDP, the third largest economy in Europe cannot afford such extravagance and spending must be drastically reduced. According to the EU executive, the deficit will exceed 3% in 2020.
“The budget will not change in either its balance sheet or its growth forecast. We have the conviction that this is the budget that is needed for the country to get going again,” said Luigi Di Maio, the head of the Five Star Movement.
In his letter to the Commission, Italy’s finance minister, Giovanni Tria, was upbeat about the country’s growth prospects, predicting that the country’s debt would fall over the next three years to reach 126% of GDP in 2021.
For its part, the International Monetary Fund challenged Tria’s predicted growth assumptions of 1.5% for 2019 and 1.6% for 2020, with its own estimate of 1% for 2020.