Italy is highly indebted. That is why the European Commission recommends now a criminal case against the country. Italy could face a billion-dollar fine. The real threat, however, is a different.
The EU Commission had fired several warning shots, and the end of 2018 to find a compromise with Italy closed – with abdominal pain and last week a letter from Brussels, sent to Rome. The Brussels authorities had not complained, the country had “sufficient progress” in the restructuring of its budget to show for it. A last – little-more successful – attempt to move to Italy to make concessions. That is why the European Commission wants to show now: We are at the end of the patience.
On Wednesday recommended a criminal case against Italy. The reason is That the southern European country is highly indebted. Too high from the point of view of the Commission. The Italian state was in 2018 with 2.3 trillion euros in Minus. This is equivalent to around 132 per cent of gross domestic product (GDP) and is one of the highest debt rates in the world. In the European Union, only Greece is worse.
According to the criteria set by the EU countries in the Maastricht Treaty, is not allowed to fault a country in the Eurozone to more than 60 percent of its GDP, and per year not more than three percent of new debt.
The Italian Minister of the interior Matteo Salvini wants to make higher debt – to the chagrin of the EU
If a state violates these provisions, he must against taxes. In order to ensure that the 19 EU countries of the existing Eurozone remains stable. But just haven’t done Italy. According to the EU-Commission has not sought the Italian government in 2018, sufficient to reduce the debt of the country.
Election promises vs. no debt
You break up the debt of Italy, its inhabitants down, have any of you humps of 38,000 euros. “Italy pays today for its debt service as much as for its entire education system,” says one of the Vice-President of the European Commission, Valdis Dombrovskis on Wednesday in Brussels. It is expected that the debt ratio of the country was rising in the next two years. Italy could tear in addition, yet an additional hurdle: The Commission assumes that the state will borrow to 2020 with 3.5%, so more than the allowed 3 per cent, new.
The dispute between the EU and Italy to take longer. Since then, in 2018 came a coalition of the populist Five-star movement and right-wing Lega to Power, preaching you of the population, expensive election promises: to lower taxes, a basic income, introducing earlier Retirement. Especially Lega-chief and Minister of the interior Matteo Salvini repeated again and again that he does not intend to stick to Brussels rules.
In Brussels, takes this view of things with more than just a raised eyebrow true: The German EU budget Commissioner, Günter Oettinger, of the conservative CDU to certify his authority to reluctance to take Action: “We would have had to intervene in some countries in the Euro zone earlier, because the new borrowing has increased dramatically,” he said of the “economic week”. “Now it’s closer to five is it in Italy to twelve than five before twelve”.
In the coalition dispute Italy’s Prime Minister, Conte threatens with his resignation
The threats from Brussels come to a time in which there is turmoil in Italy already enough. The Alliance between the Lega and the Five star movement was in a permanent Clinch. The Whole thing went so far that the party threatened to loose the Prime Minister, Giuseppe Conte recently with his resignation. In debt dispute with the EU Conte warned procedure, a deficit – as the Commission has now hurt triggered – Italy would “very”.
A long way up to billion payment
It could actually come to the Extreme, this way was still far, says Marta Pilati from the European Policy Centre, a think-tank in Brussels. “There are still a lot of room for changes.” The government wanted to, of course, to redeem their election promises, you could approach but also to the demands of the Commission.
If it should actually be a penalty, Italy should have to pay 0.2 percent of its GDP, so billion. The way is long. In a first step, the EU must agree-the Finance Minister of the recommendation of the EU Commission. The whole process can drag on for years. “In the end, it is the Commission, not the penalty”, said Grégory Claeys from the Brussels think tank Bruegel. Much more important is the Signal to the markets and the Rating agencies. “Italy will cost more to Finance itself”, therefore, it cannot be said that such a procedure is useless, because at the end of the process, maybe not a punishment, am.
During the financial crisis and in the years that followed, had the European Commission initiated proceedings against 24 of the then 27 EU countries. The numbers so far, none of the States had to. Currently, a deficit procedure, but that should be now set to be running only against Spain.