Italy slams EU’s deficit warning

Italy flatly dismissed the EU's more pessimistic outlook for the Italian economy, as the IMF warned Rome should take steps to lower debt.

Italy slams EU's deficit warning
Italy's Finance Minister Giovanni Tria (L) with his French counterpart Bruno Le Maire. Photo: Emmanuel Dunand/AFP

The populist government in Rome is under massive pressure since the European Commission on October 23rd rejected its 2019 budget, giving the ruling coalition in Rome until November 13th to make changes.

Failing that, Brussels could put Italy into something called the “excess deficit procedure”, a complicated process that could eventually lead to fines and provoke a strong market reaction.

The Italian government — a coalition of the hard-right League and anti-establishment Five Star Movement — plans to run a public deficit of 2.4 percent of GDP, three times the target of its centre-left predecessor.

Scrutinising those plans, the European Commission on Thursday said Italy's deficit will reach 2.9 percent of its gross domestic product next year, much bigger than the 1.7 percent in its previous forecast.

“Our projections differ somewhat from those of the government. This is largely due our growth projections which have been more conservative,” European Economics Commissioner Pierre Moscovici said.

READ ALSO: EU predicts Italy's deficit will soar next year

The Italian government's 2019 budget is based on an estimate of annual growth of 1.5 percent — a figure considered optimistic by the IMF, which has forecast only one percent, and the Commission, which expects 1.2 percent.

Crucially, the EU also believes Italy will only grow by 1.2 percent in 2019, whereas Rome's 2019 budget is based on an estimate of annual growth of 1.5 percent.

“We regret to note the Commission's technical failure,” Italian Finance Minister Giovanni Tria said in a statement, slamming “an inadequate and partial analysis” of his proposed 2019 budget.

“The fact remains that the Italian parliament has authorised a maximum deficit of 2.4 percent for 2019 that the government, therefore, is committed to respecting,” Tria said.

Italian leaders insist the low growth rate is all the more reason to kickstart the economy through a spending spree, but Brussels fears the rising deficit could further feed Italy's exploding debt. Italy already owes €2.3 trillion euros, a sum equivalent to 131 percent of its GDP. 

A ticking 'debt clock' in Milan. Photo: Filippo Monteforte/AFP

Even if Brussels fails to punish Rome, many assume the markets will, with the fallout possibly spreading to other European countries that are only just recovering from the eurozone debt crisis that peaked early this decade.

In its autumn forecast for Europe, the IMF said Italy — along with Turkey — “should prioritise measures that reduce fiscal deficits toward their medium-term targets and lower debt.”

All eyes are on the market's “spread” — or difference between yields on ten-year Italian government debt compared to those in Germany — which has more than doubled since mid-May, when negotiations to form the populist coalition government in Rome began.

READ ALSO: Italians rush to put money into Swiss banks as budget fears grow

The EU's warning to Italy came as it also warned that growth in the eurozone would slow in 2019 and beyond, citing global uncertainty and heightened trade tensions.

Italy's problems arise as fears of an economic slowdown in Europe have risen over the possibility of a no-deal Brexit and trade tremors sparked by US President Donald Trump's protectionist policies.

In its latest forecasts unveiled on Thursday, the European Commission expects growth in the currency bloc of 2.1 percent this year, followed by 1.9 percent in 2019, which is lower than the 2.0 percent predicted in its last assessment in July. Growth is expected to continue to decline in 2020 to 1.7 percent.


Photo: Filippo Monteforte/AFP

By AFP's Alex Pigman


Berlusconi to run for Senate in Italy’s elections

Scandal-plagued former premier Silvio Berlusconi said he plans to return to Italy's parliament in upcoming elections, almost a decade after being forced out over a conviction for tax fraud.

Berlusconi to run for Senate in Italy's elections

“I think that, in the end, I will be present myself as a candidate for the Senate, so that all these people who asked me will finally be happy,” the 85-year-old billionaire and media mogul told Rai radio on Wednesday.

After helping bring down Prime Minister Mario Draghi last month by withdrawing its support, Berlusconi’s centre-right Forza Italia party looks set to return to power in elections on September 25th.

It is part of a right-wing coalition led by Giorgia Meloni’s post-fascist Brothers of Italy, which includes Matteo Salvini’s anti-immigration League.

Berlusconi brushed off reports he is worried about the possibility of Meloni – whose motto is “God, country and family” – becoming prime minister.

Noting the agreement between the parties that whoever wins the most votes chooses the prime minister, he said: “If it is Giorgia, I am sure she will prove capable of the difficult task.”

READ ALSO: Italy’s hard right set for election victory after left-wing alliance collapses

But he urged voters to back his party as the moderate voice in the coalition, emphasising its European, Atlanticist stance.

“Every extra vote in Forza Italia will strengthen the moderate, centrist profile of the coalition,” he said in a separate interview published Wednesday in the Il Giornale newspaper.

League party leader Matteo Salvini (L), Fratelli d’Italia leader Giorgia Meloni and Forza Italia leader Silvio Berlusconi pictured in October 2021. The trio look set to take power following snap elections in September. Photo by CLAUDIO PERI / ANSA / AFP

Berlusconi was Italy’s prime minister three times in the 1990s and 2000s, but has dominated public life for far longer as head of a vast media and sports empire.

The Senate expelled him in November 2013 following his conviction for tax fraud, and he was banned from taking part in a general election for six years.

He was elected to the European Parliament in 2019, however, and threw his hat in the ring earlier this year to become Italy’s president — although his candidacy was predictably short-lived.

Berlusconi remains a hugely controversial figure  in Italy and embroiled in the many legal wrangles that have characterised his long career.

He remains on trial for allegedly paying guests to lie about his notorious “bunga-bunga” sex parties while prime minister.

Berlusconi has also suffered a string of health issues, some related to his hospitalisation for coronavirus in September 2020, after which he said he had almost died.