Italy’s 2019 budget draft is in serious breach of EU budget rules, the European Commission told Rome on Thursday, in a step that prepares the ground for what would be an unprecedented rejection of a member state’s fiscal plan.
The Commission said in a letter to Economy Minister Giovanni Tria, published on its website, that planned government spending was too high, the structural deficit – excluding one-offs and business cycle effects – would rise instead of fall, and that Italian public debt would not fall in line with EU rules.
“Those three factors would seem to point to a particularly serious non-compliance with the budgetary policy obligations laid down in the Stability and Growth Pact,” the letter said.
The Commission said that the draft budget envisaged a nominal rate of growth of net government expenditure next year of 2.7 per cent, while EU rules allowed Italy only 0.1 per cent.
The structural deficit would rise 0.8 per cent of GDP next year, while a binding recommendation by EU finance ministers from July obliged Rome to cut it by 0.6 per cent of GDP.
“Moreover, with Italy’s government debt standing at around 130 per cent of GDP, our preliminary assessment also indicates that Italy’s plans would not ensure compliance with the debt criterion benchmark … which requires a steady reduction of the debt level towards the 60 per cent threshold,” the letter said.