Italy is ‘sleepwalking into instability’: EU recommends sanctions over budget

Brussels officially rejected Italy's big-spending budget on Wednesday, clearing the path for unprecedented sanctions and deepening a bitter row with Rome's government.

Italy is 'sleepwalking into instability': EU recommends sanctions over budget
Italy Finance Minister Giovanni Tria (L) with European Commissioner Pierre Moscovici. Photo: Alberto Pizzoli/AFP

“With what the Italian government has put on the table, we see a risk of the country sleepwalking into instability,” Commission Vice President Valdis Dombrovskis told a press conference in Brussels.

“We conclude that the opening of a debt-based excessive deficit procedure is… warranted,” he added, referring to the EU's official process to punish member states for over-spending.

The conclusion was not surprising, coming after the commission already rejected Italy's 2019 budget last month in a first for the EU. But Italy refused to back down after the Brussels veto, setting the stage for Wednesday's final opinion at the commission.

The Italian budget was found at fault for scrapping EU-pushed cost-cutting agreed by the previous government and instead promises a spending spree, including a basic monthly income for the unemployed and a pension boost. The commission on Wednesday deplored “a marked backtracking” on past reforms, “in particular on pension reforms”.

READ ALSO: Here are the main things included in Italy's 'people's budget'

Italian Prime Minister Giuseppe Conte (C) with his deputies Luigi Di Maio (L) and Matteo Salvini (R). Photo: Filippo Monteforte/AFP

With its opinion, EU member states now have two weeks to decide whether to allow the commission to trigger the excessive deficit procedure, a months-long process that could lead to fines. Once activated, the procedure allows Rome the opportunity to negotiate and correct its ways before Brussels can inflict a sanction that can come as high as 0.2 percent of Italy's GDP.

Expectations are low in Europe that Italy's right-wing populist coalition will concede on the matter, at least until European elections next May, where the government hopes to ride a wave of anti-EU sentiment. The coalition government, made up of the League and the Five Star Movement, insists the budget will help kickstart growth in the eurozone's third largest economy and reduce debt.

“Has the EU letter arrived? I am also waiting for Santa Claus,” said the deputy prime minister Matteo Salvini, adding: “We will respond to the EU in an educated way.”

READ ALSO: Italy's budget battle with Brussels: What you need to know

Photo: Gerard Cerles/AFP

All eyes now are on the markets, which could raise the pressure on Rome to kowtow to Brussels, and even split the ruling coalition in Italy.

“While the government's stance may be tenable in the short and medium-term, it will only be sustainable if market conditions don't deteriorate significantly,” said Mujtaba Rahman, a political analyst at Eurasia Group. 

The closely watched “spread” — the difference between yields on 10-year Italian government debt compared with those in benchmark Germany — reached 316 basis points on Wednesday, down from 326 late on Tuesday. It has more than doubled since May when negotiations to form the coalition government in Rome began, but is lower than the roughly 400 mark that Italy argues is the danger zone.

In its budget, Italy intends to run a public deficit of 2.4 percent of gross domestic product in 2019 — three times the target of the government's centre-left predecessor — and one of 2.1 percent in 2020.

Brussels forecasts Italy's deficit will reach 2.9 percent of GDP in 2019 and hit 3.1 percent in 2020, breaching the EU's 3.0 percent limit. 


By AFP's Alex Pigman and Céline Cornu


Protesters gather in Milan as Italy limits same-sex parents’ rights

Hundreds of people took to the streets of Milan on Saturday in protest against a new government directive stopping local authorities from registering the births of same-sex couples' children.

Protesters gather in Milan as Italy limits same-sex parents' rights

“You explain to my son that I’m not his mother,” read one sign held up amid a sea of rainbow flags that filled the northern city’s central Scala Square.

Italy legalised same-sex civil unions in 2016, but opposition from the Catholic Church meant it stopped short of granting gay couples the right to adopt.

Decisions have instead been made on a case-by-case basis by the courts as parents take legal action, although some local authorities decided to act unilaterally.

Milan’s city hall had been recognising children of same-sex couples conceived overseas through surrogacy, which is illegal in Italy, or medically assisted reproduction, which is only available for heterosexual couples.

But its centre-left mayor Beppe Sala revealed earlier this week that this had stopped after the interior ministry sent a letter insisting that the courts must decide.

READ ALSO: Milan stops recognising children born to same-sex couples

“It is an obvious step backwards from a political and social point of view, and I put myself in the shoes of those parents who thought they could count on this possibility in Milan,” he said in a podcast, vowing to fight the change.

Milan's mayor Giuseppe Sala

Milan’s mayor Giuseppe Sala has assured residents that he will fight to have the new government directive overturned. Photo by Miguel MEDINA / AFP

Fabrizio Marrazzo of the Gay Party said about 20 children are waiting to be registered in Milan, condemning the change as “unjust and discriminatory”.

A mother or father who is not legally recognised as their child’s parent can face huge bureaucratic problems, with the risk of losing the child if the registered parent dies or the couple’s relationship breaks down.

Elly Schlein, newly elected leader of the centre-left Democratic Party, was among opposition politicians who attended the protest on Saturday, where many campaigners railed against the new government.

Prime Minister Giorgia Meloni, whose Brothers of Italy party came top in the September elections, puts a strong emphasis on traditional family values.

“Yes to natural families, no to the LGBT lobby!” she said in a speech last year before her election at the head of a right-wing coalition that includes Matteo Salvini’s anti-immigration League.

Earlier this week, a Senate committee voted against an EU plan to oblige member states to recognise the rights of same-sex parents granted elsewhere in the bloc.