- European Union formally rejects Italian budget for a second time after Rome makes only small tweaks.
- The path is no set for the opening of the EU’s so-called Excessive Deficit Procedure – which has the power to fine countries within the Eurozone.
- The budget proposes increasing both Italy’s overall government debt and its deficit in the short run, pushing the deficit as high as 2.4% of gross domestic product over the coming years.
- In doing so, Italy would fall foul of a previously mandated maximum deficit level of 0.8% of GDP.
The European Union on Wednesday once again rejected the Italian government’s proposed budget for 2019, paving the way for financial sanctions against the continent’s fourth largest economy.
The budget proposes increasing both Italy’s overall government debt and its deficit in the short run, pushing the deficit as high as 2.4% of gross domestic product over the coming years. This means Italy would fall foul of a previously mandated maximum deficit level of 0.8% of GDP.
Having already rejected initial proposals from Italy, the EU asked the country’s politicians to go back to the drawing board, but Italy made only minor tweaks, which have not satisfied the European Commission, leading to the second rejection.
“Our analysis suggests that the debt rule must be considered to have not been respected,” the Commission said in a statement on Wednesday morning, according to the ANSA news agency.
The rejection, it said, means that Italy will now be subject to the so-called Excessive Deficit Procedure – which has the power to fine countries within the Eurozone who break spending rules within the bloc. The size of any fine is unclear.
“We conclude that the opening of a procedure for excessive deficit based on the debt is therefore justified,” the European Commission’s statement said.
Prior to their initial rejection, the European Union had never formally dismissed a eurozone member’s budget plans.
Italy’s government remained resolute in its plans, despite the second rejection, with Lega Nord leader Matteo Salvini saying he will talk to the Commission about the findings “politely, as always, but will carry on.”
He added, however, that he is not willing to talk to the Commission about the deficit, saying that Italy’s coalition is determined to enact the increased deficit.
Italian Prime Minister Giuseppe Conte, a technocrat, is set for talks with European Commission President Jean-Claude Juncker this weekend.