Brussels has written to Italy’s populist government warning of “serious” concerns that the country’s draft budget plan will break eurozone spending rules — a development that is likely to fuel fears of a full-blown showdown between Rome and the EU later this month.
In a letter to Giovanni Tria, Italy’s finance minister, the EU’s two commissioners in charge of budgetary rules urged Rome to take heed of rules requiring Italy to shrink its budget deficit next year.
It is the first formal communication the commission has sent to Rome since the Italian government unveiled a rules-busting budget plan last week.
The letter reiterates that Italy is required to consolidate its budget deficit by 0.6 per of GDP cent next year. Instead, draft spending plans unveiled by Mr Tria point to an deficit expansion of 0.8 per cent — leading the deficit to swell to 2.4 per cent of GDP in 2019. The figure is three times higher than the 0.8 per cent target mandated by EU rules.
“Italy’s revised budgetary targets appear prima facie to point to a significant deviation from the fiscal path recommended by the Council. This is therefore a source of serious concern”, says the letter sent on Friday.
Earlier this week, Mr Tria — a relative moderate in the government — told his fellow eurozone finance ministers that Rome’s spending ambitions were still up for debate and his government was ready to listen to recommendations from Brussels once the budget is formally submitted in mid-October.
The letter from Brussels is the first formal warning shot sent to Italy — the eurozone’s third-largest economy. It points to growing fears inside the EU that despite Mr Tria’s reassurances, hardliners in the populist coalition are determined to rip up spending rules and force a confrontation with Brussels in less than two weeks time.
The commission has said it will wait until it has received a final draft budget plan from Italy due by October 16 and then make its own assessment about the state of the deficit and debt ratio.
Friday’s letter was sent in response to growth projections for the Italian economy that Mr Tria sent to the commission earlier this week. Italy’s forecasts for growth are more optimistic than those from Brussels, leading to concern that any final estimate of the 2019 deficit will be higher than 2.4 per cent.
The letter adds: “We call on the Italian authorities to ensure that the Draft Budgetary Plan will be in compliance with the common fiscal rules and look forward to seeing the details of the measures it may contain. In the meantime, as in past years and months, we remain available for constructive dialogue”.