Moscovici reserves judgement on Italian economic policy awaiting October’s budget

EPA-EFE/STEPHANIE LECOCQ

Pierre Moscovici give a press conference on on the Economic and Monetary Union programmes ,including the Reform Support programme and the European Investment Stabilisation Function, at the European Commission in Brussels, May 31, 2018

Moscovici reserves judgement on Italian economic policy awaiting October’s budget


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The European Commission will wait until the Italian government presents its 2019 budget before it passes judgement on Italian economic policy.

“… We’ll keep calm, be patient, have a spirit of common work, and there’s the rendezvous on October 15,” Economic Affairs Commissioner Pierre Moscovici told the press on Wednesday in Strasbourg.

Finance Minister Giovanni Tria has offered repeated assurances of Italy’s commitment to the Euro and he is expected to meet with Pierre Moscovici during the G30 Summit in Buenos Aires next week.

In the meantime, members of the former government are expressing concerns for the rollback of key reforms that in their view will destabilize Italy’s fiscal consolidation programme.

However, Tria said on Tuesday that Italy will not seek to narrow the 2018 budget deficit and has already increased the 2019 deficit target, Reuters reports. The outgoing government was planning to halve the public deficit from 1,6% of the GDP to 0,8%.

Lega and the Five Star Movement (MS5) campaigned on a promise to reduce corporate tax, reduce the age of retirement, and increase social welfare transfers by guaranteeing a minimum income of €720 a month.

Talking to CNBC on Wednesday, Italy’s former finance minister Pier Carlo Padoan expressed confidence that Tria intends to retain Italy on a path to fiscal consolidation and debt reduction. However, he did express concerns about the cost of the electoral promises made by the ruling coalition.

Italy has the second biggest debt-to-GDP ratio in the Eurozone and the largest in Europe in absolute numbers. The third biggest economy in the Eurozone has a 132% debt-to-GDP ratio.

Italy has already passed a reform that levels employment rights between temporary and full-time employees and increases unfair dismissal compensations, which critics suggest could hinder the easy-fire-easy-hire model.

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