Brussels is continuing to apply pressure on the Italian government as it hopes to force Italy into realigning its budgetary policy to meet the EU’s fiscal compact requirements.
“It is important to keep up with the commitments,” Eurogroup President Mario Centeno told reporters on 13 June, while urging Italy to clarify its economic intentions as its stability is vital to the Eurozone.
The EU’s Commissioner for the euro, Valdis Dombrovskis, said Italy needs to “substantially correct” its economic course to remain fiscally solvent or else it will continue to maintain a downward trajectory on its debt-to-GDP ratio, which currently stands at 132%.
Arriving at the latest Eurogroup meeting in Luxembourg, French economy minister Bruno Le Mair urged the Italian government to the assistance offered by the European Commission, a notion that was backed by German Finance Minister Olaf Scholz, who noted that it is “in the interest of all the Eurozone members to stick by the (bloc’s) common rules”.
Seeking to ease concerns, Italy’s Finance Minister Giovanni Tria said the latest incoming data does not justify any further demands from the EU and that Italy is not bound to readjust its fiscal planning based in the concerns of the Brussels establishment. Tria did, however, make clear that the Italian government is interested in finding a compromise with the Commission and is willing to discuss the matter further.
Italy’s anti-establishment coalition government appears to be facing a revenue shortfall that could force it to introduce a VAT hike as it looks to raise €23 billion.
Tria has warned that he had no plans to introduce mini-Bots – small-denomination bonds that are viewed as a parallel currency and could be issued to pay government suppliers and settle tax shortfalls. Tria said mini-Bots would add to the volume of mounting public debt and would be considered illegal, echoing the views expressed by the President of the European Central Bank Mario Draghi.
Speaking on the sidelines of the Eurogroup in Luxembourg, the head of the International Monetary Fund, Christine Lagarde, said that the Italian government should find other means to pay its suppliers and regular Italian bonds could “absolutely do the job.”
However, the idea of a parallel currency was unanimously approved by the ruling coalition partners in Italy, Lega and Five-Star Movement, in a non-binding motion that gave the government a mandate to issue them at will.
Deputy Prime Minister Matteo Salvini from Lega secured cabinet approval on 12 June for the introduction of a 15% flat tax on income, while his Five-Star counterpart, Luigi Di Maio, is pushing for the introduction of a minimum wage. Both policies have angered the Brussels establishment and could put the Italian government on a collision course with the European institutions.