Withdrawal for the Italian budget: Rome facing Brussels

"Brussels is not attacking a government, but a people," said Deputy Prime Minister and President of Lega, Salvini, after the European Commission rejected Italy's plans for the first time. coming year. He was not concerned about Italian bond yields, which rose sharply on Tuesday. "This government will not reverse because of the increase in bond yields," Salvini said.

Di Maio demands respect from Brussels

Second Deputy Prime Minister and five-star boss Luigi Di Maio was relentless. "We will respectfully explain to the European Commission why we want to turn away from austerity, but the same respect must show Brussels to the Italian people and the government that represents them," Di Maio said. The government continues to work for the good of citizens. The rejection of the EU is not surprising, according to Di Maio: "This is the first Italian budget written by Rome and not by Brussels," he commented on Facebook.

Giuseppe Conte was a little more hurry: he said that Italy could reduce its spending if bond yields continued to rise sharply. However, substantial changes in the draft budget will not make Italy, said Conte in an interview with the US Bloomberg news agency.

Unsurprisingly, the Brussels decision also applied to the Italian Ministry of Economic Affairs. "We were expecting it," said a spokesman. In any case, the dispute with the European Commission will not prevent the budget, which must be submitted to the Italian Parliament for consideration at the end of this week.

Opposition: Italy threatens recession

However, the Italian opposition parties were worried and warned of the catastrophic consequences of a government break with Brussels. Italy is therefore threatened with recession. "For years, we fought to regain our credibility in Europe and the financial markets.Now Salvini, Di Maio and their spokesman, Conte, are destroying Italy's fiscal stability." Even with a deficit 2.4% of gross domestic product (GDP), they will not be able to keep their crazy election promises, "said former Prime Minister Matteo Renzi.

Italian leader Sergio Mattarella reminded the populist government of Rome: In a speech on Tuesday, he insisted on the importance of a balanced budget. "Disruptions" in public finances have a negative impact on low incomes, families leaving savings and businesses, said Mattarella. Vincenzo Boccia, president of the Italian industrial federation Confindustria, also called on the government of Rome to change its plans and maintain open dialogue with Brussels.

"Lega wants climbing"

Italian MP Herbert Dorfmann (European People's Party), from South Tyrol, hopes that the Italian government will continue its confrontation with Brussels. "The Lega is seeking escalation," Dorfmann told reporters in Strasbourg. The further the Commission moves away, the better for Salvini 's party.

"In Brussels, it should have been more professional," said Dorfmann. To say at the outset that the draft budget was rejected was not democratic. "The whole debate, deliberately provoked by the Lega, could have been saved." Contrary to rumors that the Italian media were informed, Dorfmann does not believe that Rome will present a "Plan B" for the budget. It is only recently that a survey has shown that 80% of Italians are in the project. The government knows that their line is well received. So finding a solution is not their "political goal".

The Commission rejected the draft budgets for the first time

Previously, the EU Commission had rejected Italy's budget plans for the coming year in an unprecedented process. The government of Rome must now submit a new project within three weeks. Italy's budget plans are by no means compatible with the European stability rules, according to the Commission.

"We do not see an alternative," said Valdis Dombrovskis, Commissioner for the Euro, in Strasbourg. Experience has shown over and over again that an increase in debt would not result in growth, said the Latvian politician. He warned the Italian government that the debt will also affect future generations. EU Commissioner for the Economy Pierre Moscovici said he regretted, along with the College, that this decision was taken. But "it will not surprise anyone."

The populist five-star movement and the populist right-wing Lega government sent a finance bill on 15 October to increase the new debt to 2.4% of economic output – three times more than promised by the previous government .

Rome wants to finance its election promises

Rome wants to use it to finance election promises, such as some kind of basic financial income and tax relief for small and medium-sized businesses. In Europe, a new debt not exceeding 3% of gross domestic product (GDP) is allowed. This is to ensure the stability of the single currency.

Italy, however, has a huge debt of 2,300 billion euros and, with over 130% of its economic output vis-à-vis Greece, the highest debt ratio of any country in the world. # 39; Europe. That's the ratio of total debt to GDP. The country is therefore obliged to reduce its debt in the medium term.

Currently no direct sanction possible

Once the corrected Rome budgets have arrived, the European Commission will have three weeks to formulate its final opinion. There is no possibility of direct sanction for the moment. The European Commission could also initiate a formal deficit procedure against Italy.

In the end, EU finance ministers could theoretically decide on financial sanctions for persistent violations of the stability rules. This seems unlikely. In 2016, for example, but in somewhat different circumstances, EU Member States have been lenient towards Spain and Portugal, despite serious infringements.