The risky fiscal policies of the Italian populist force the EU to a criminal case, said EU Commissioner Dombrovskis. But in Rome, he is not taken Seriously. How long has it been going well? Bernd Riegert from Brussels.
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EU threatens with the excessive deficit procedure
“The letter of our government every 15 minutes any letters. These are all just kritzelnde bureaucrats”, the Italian Minister of the interior and party leader of the Right-wing, Matteo Salvini, recently, about the EU in a TV Show funny. “Now I’m waiting for a letter from Santa Claus,” to put off for today after the European Commission initiated an excessive deficit procedure. His coalition partner, the populist “movement 5 stars”, the economy Minister, Luigi Di Maio, said in Rome, with higher debt levels in Italy were necessary in order to solve European problems. The Italian government is of the view that the fiscal policy of the EU is that economic development in Italy was in the last few years, rather modest, and the debts continued to grow – now at 131 percent of annual economic output. From Brussels, you will not continue to patronize, is the currency in Rome.
Di Maio wants to fight for his budget (victory celebration after the publication of the draft in Rome in September)
“A Logical Consequence”
A power struggle with the EU Commission and the member States of the Euro-Zone seems to be programmed, because the EU will not let up. The EU Commissioner Valdis Dombrovskis opened now in Brussels, a “deficit procedure” against Italy, because the total debt with the budget plan in 2019 would still continue to rise, instead of falling slowly, as agreed with the previous government. “Unfortunately, Italy is in breach of, fundamentally, against all the criteria, what makes a deficit procedure are necessary,” said Dombrovskis. “We are ready to dialogue.” The doubts about the Italian assumptions for growth remained, said monetary Affairs Commissioner Pierre Moscovici. “Who’s going to pay at the end of the bill? To this question we have no answer.” It is quite logical and irrefutable, that the EU Commission could not respond to Italy’s draft budget is different, so Moscovici.
For budget constraints to be the consent of the other 18 Euro is needed-States. To the fulfilment of the conditions in Italy are granted for three to six months time. Only after that the EU could impose fines-Commission sensitive money or the payment of EU funds to Rome. So far, the Commission had to resort to this drastic remedy.
Procedure against Italy is inevitable: EU commissioners Dombrovskis (li.) and Moscovici
“Italy risks its prosperity”
The nationalist-populist government in Rome wants to reduce with higher debt, new Finance for social services, the retirement age and taxes, as well as trigger investment. This will boost the statement from Italy’s Finance Minister, Giuseppe Tria, the economic growth and at the end of a Fall of the debt. The experts in the EU-Commission and also the Finance Ministers in the currency community see it differently. The assumptions on which the Italians were much too optimistic. The higher deficits and the rising cost of the debt would drive the already weak Italian banks in the crisis, criticized EU Commissioner Dombrovskis. At the end of the Italian state payment could be unable to. Now everyone in Italy can pay 1000 euros in interest per year for the debts of the state. “The government is risking the welfare of the Italians,” said Dombrovskis.
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Escalation in EU criminal proceedings against Italy
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Escalation in EU criminal proceedings against Italy
The EU Commission insists, therefore, that the populists in Rome stick to the rules and your budget correct numbers. But that isn’t going to happen, economy, announced Minister Di Maio again. You could talk to, but the basic pillar of the budget would not be changed. The deficit procedure has been triggered, the Commission is complex and requires a whole series of advice steps and decisions by the 18 other member States of the Euro-Zone. In a few weeks, the EU will Italy concrete measures and savings application, which would take three to six months. Rome should ignore this, could be met at the end of the process, juicy money, which can quickly reach billions.
Cost of debt could rise
Economists warn, however, that international donors in Italy are so a lot of patience to not have and the cost of Italian debt to rise rapidly, which in turn leads to a immense burden to the budget. The risk premiums for Italian government bonds has doubled since the inauguration of the “5-star-Lega”coalition in June already. The trend continues to grow. Currently, the called the “spread” is located at 330 points. A brand of 400, it would be critical, self-given to the League chief Salvini, a few weeks ago. Representatives of the populist coalition had always spoken of it again, that the Italian government could introduce a “parallel currency” to pay his bills and taxes. This arbitrary money printing would be prohibited under the rules of the Euro-Zone.
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Budget dispute: the Italians see themselves as losers
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Budget dispute: the Italians see themselves as losers
Parallel Currency?
The Economist Alessio Terzi from the Brussels research Institute Bruegel said the DW, he can see two options: “The best scenario would be that the Rulers in Rome simply have no idea what you doing actually. The worst scenario is that you want to provoke a crisis, which leads in the end to the introduction of a second currency in Italy and the sudden exit from the Euro Zone.” The Italians would lose a large part of their savings. The economic performance would break down.
Less drastic scenarios from the American Peterson Institute for International Economics. Its experts writing in a recent analysis that the markets will have little patience with Italy. The economy should not break in growth due to external shocks, are likely to be the cost of the debt is still in the frame. “A crisis is not inevitable consequence of the dispute between the EU and Italy.”
Prefer to negotiate
“Italy cannot allow itself a second recession,” said the Spanish foreign Minister, Josep Borrell, in an Interview with the Internet platform Politico in Brussels. “I hope the Italian government and the EU Commission will be to their mutual accusations and to come to an agreement in accordance with the model of Portugal.” Portugal had agreed, after years of austerity measures with the EU Commission’s economic recovery plan, and is now available from the rescue Fund of the EU. Borrell also warned that Italy could not deal with Greece, which had preserved the EU against draconian conditions prior to the Bankruptcy. Greece was eight years of credit of the Euro rescue umbrellas-dependent and is now sitting on the largest mountain of debt of all Euro-States.