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ROME – The Italian government said Tuesday to the European Union that it would pursue its budget plans contrary to the rules despite calls by the bloc authorities to revise its budget proposal for next year.
In a letter to the European Commission, the Italian Minister of Economy, Giovanni Tria, said that despite criticism from the EU, its goal would still be to achieve a budget deficit of 2, 4% of the gross domestic product to finance expansionary and costly measures of the two anti-institutions parties in power. promised to their constituents.
The letter also planned to sell government-owned assets of 1 percent of GDP next year to reinforce the government's commitment to keeping its debt on a downward path. Sales will help Italy reduce its debt to 126 percent of GDP in 2021, up from 131.2 percent last year, according to the paper.
The government also said it hoped the measures described would result in economic growth of 1.5% in 2019.
Italy's decision is the last step in the Rome-Brussels fight over the country's spending plans.
In October, the EU took the unprecedented decision to reject Italy's draft budget, which was inconsistent with the union's rules on fiscal discipline, by intensifying the battle between the establishment of the Europe and those who opposed it in Rome.
Italy had three weeks or until Tuesday to meet Brussels. On 21 November, the Commission will issue opinions for all countries considered to have breached the deficit and debt rules and is likely to recommend the opening of an excessive deficit procedure at the end of the year. against Italy.
The budget fight may well be integrated at the beginning of December, when the other EU finance ministers will have to decide whether they want to approve or reject the Commission's recommendation.
If Italy refuses to adopt a compliant budget, the resulting disciplinary procedure could result in fines equivalent to 0.2% of Italy's GDP and the freezing of certain financing. These fines may increase over time if Italy continues to challenge Brussels.
Investors have emptied Italian bonds and bank stocks several times since the government's creation in May, fearing that its plans will hurt the country's already fragile finances.
The yield gap between 10-year Italian government bonds and German bonds reached 3.3 percentage points in mid-October, the largest gap of the last five years.
On Tuesday, before the Italian government disclosed its response to the EU, this gap was 3.03 percentage points.
Rome has always said that the deficit needs to be further widened to finance a number of measures, including the reduction of taxes and the creation of a basic minimum income for the poor and the unemployed, in order to stimulate the sluggish growth of the economy. country.
On Tuesday, the International Monetary Fund (IMF) said the impact of stimulus measures adopted by Italy on growth "would be uncertain for the next two years and probably negative in the medium term if the differences remain high".
Write to Giovanni Legorano at [email protected]
