EU’s Dombrovskis says Commission weighing excessive deficit procedure against Italy
The Vice President of the European Commission who oversees the euro, Valdis Dombrovskis, said on Friday that the EU executive was assessing the need to open excessive deficit procedures against Italy if Rome did not change its budget by Nov. 13.
The Commission last month rejected Italy’s fiscal plan for 2019 and has given Rome until Nov. 13 to present a new budget. But Rome reiterated on Thursday that it had no intention of changing its plans.
“We still expect the official response of the Italian government… In parallel, we are assessing the need to open excessive deficit procedures related to those countries whose debt-to-GDP ratio exceeds 60 percent,” Dombrovskis told reporters in Helsinki, where he met with Finland’s finance minister Petteri Orpo.
Earlier on Thursday, the EU executive forecast the Italian economy would grow more slowly in the next two years than Rome thinks.
But Italy’s Prime Minister Giuseppe Conte said the Commission’s forecasts underestimated the positive impact on economic growth of the budget and of structural reforms that Rome is enacting.
“Our assessment is that Italy’s government is basing its budget on overly optimistic assumptions,” Dombrovskis said.
“Basically the assumption is that if they will increase budget deficit, increase public spending, it will stimulate the economy and thus will help to reduce budget deficit. We see that this is actually not materialising,” he said.
Dombrovskis pointed out that Italy’s interest rates had already increased “substantially” from a year ago and could pressure the real economy in the form of higher financing costs for Italian companies, higher interest rates on consumer loans and weakened investments.
“Instead of expected stimulus, we actually see that the strategy is further slowing down Italy’s economy. We expect actually Italy being the slowest-growing EU economy with 1.1 percent growth,” he said.
Source: Reuters (Reporting by Anne Kauranen; Editing by Hugh Lawson)