European Commission vetoes Italy's fiscal plan

By Muhammed Ali Gurtas

ANKARA

The European Commission on Wednesday vetoed Italy's revised draft budgetary plan for 2019.

"At 131.2 percent of GDP in 2017, the equivalent of €37,000 per inhabitant, Italy's public debt exceeds the 60 percent of GDP reference value of the Treaty [on the functioning of the EU]," the Commission said.

The Commission stated that the country had the second-largest public debt-to-GDP ratio in the 28-member bloc and did not satisfy the debt reduction criteria last year.

"Moreover, Italy is not projected to comply with the debt reduction benchmark in either 2018 or 2019 based on both the government plans and the Commission 2018 autumn forecast.

"Those findings clearly suggest that, before consideration is given to all relevant factors, the debt criterion as defined in the Treaty does not appear to be fulfilled by Italy prima facie," it said.

The Commission said the debt criterion should be considered as not complied with, and a debt-based excessive deficit procedure is thus warranted.

Speaking at the European Semester Autumn Package press conference, the Commission's vice president Valdis Dombrovskis said: "Euro area countries are on the same team and playing by the same rules."

"These rules are there to protect us," Dombrovskis said. "They provide certainty, stability and mutual trust."

"With what the Italian government has put on the table, we see a risk of the country sleepwalking into instability.

"I hope this risk is to be avoided, because in the end, what is at stake is the well-being and future prosperity of the Italian people," he said.

Dombrovskis said the Commission's job is to flag risks before it is too late.

"This is what the Commission has been doing over the past weeks, and what we are doing again today," he added.

Commissioner Pierre Moscovici also said in a Twitter post: "Our opinion on Italy’s revised draft budgetary plan confirms our initial assessment that it is in 'particularly serious non-compliance' with the EU Council’s recommendation to Italy - which the government itself signed up to last July."

"Today is not yet the opening of an excessive deficit procedure," he said. "First the member states must give their views within two weeks, then the Commission will have to prepare the procedure, including a new recommendation for Italy to correct its deficit and debt trajectory."

"Our door remains open to dialogue with Italy," Moscovici said, adding:

"As we move closer to opening an excessive deficit procedure, it is even more essential that the Italian authorities engage constructively with the Commission."

Last month, Italy's budget plan for next year was found significantly deviated from the fiscal path recommended by the Commission, and the country was requested to present a revised draft budgetary plan for 2019 in three weeks.