Italy has vowed to stick to its public spending hike, despite criticism from the European Union. Rome’s populist/far-right coalition government responded to Brussels’ concerns by refusing to budge on its 2019 budget.
“The figure of 2.4% (deficit to GDP ratio in 2019) is a ceiling that we have solemnly undertaken to respect,” Prime Minister Giuseppe Conte told journalists after the coalition sent its pledge in a letter to EU officials in Brussels.
“It’s possible that we don’t reach it, but it’s certain that we won’t exceed it,” Conte said of the self-imposed deficit limit.
As reported by FRANCE 24, Conte also vowed that Italy would remain within the European Union and keep the euro currency.
“Read my lips: for Italy there is no chance of Italexit, to get out of Europe or the eurozone,” Conte said, amid growing concerns over Brexit negotiations and the prospect of Britain crashing out of the bloc without an agreement.
As previously reported, a deficit of 2.4% of annual economic output next year would be triple the amount forecast by the previous Italian government and come close to the EU limit of 3.0%.
In turn, it would aggravate Italy’s already massive debt mountain, at some 130% of gross domestic product (GDP), way above the EU 60% ceiling and second only to Greece’s in Europe.
Italy’s ‘people’s budget’
According to the Agence France-Presse (AFP), Italy’s government, in its four-page letter to the European Commission, admitted its budget was “not in line with the norms of the stability and growth pact” governing EU member state public finances.
“It was a difficult decision but necessary given the delay in achieving pre-crisis GDP levels and the dramatic economic situation of the most disadvantaged in Italian society,” the letter said.
Aimed at fulfilling electoral promises, Italy’s planned spending boost is what the government calls its “people’s budget”. It includes a series of pension hikes and tax cuts.
“I see that in a country with six million living in poverty, they are implementing plans to alleviate poverty,” EU Economics Commissioner Pierre Moscovici said on Monday.
Rome “thinks that raising public spending will create growth (but) we’re in a period of overheating and most economists think that this will not be the case,” Moscovici told France Inter radio.
In a separate report, the Reuters news agency noted that Eurogroup head Mario Centeno is “very positive” a budget deal will be reached over Italy’s 2019 budget.
“That is what I expect,” Centeno told Reuters in an interview, referring to the likelihood of such an agreement.
“We obviously have processes running in every country with their democratic dynamics, which have to conform to the rules of belonging to the euro area,” Centeno said. “We cannot be complacent about this, but we also don’t need to be dramatic.”
