The European Commission has taken the first step towards sanctioning Italy over its national budget in an ongoing row over the country’s finances.
In October, the EU executive body rejected Italy’s draft budget and told it to make changes – an unprecedented event in European politics.
Italy, however , said it would stay glued to its high-spending goals.
On Wednesday, the Commission said formal proceedings that could bring financial sanctions were “warranted”.
Commission Vice-President Valdis Dombrovskis said: “With what the Italian government has placed on the dining table, we view a risk of the nation sleepwalking in to instability. ”
That he said that the EU’s disciplinary measure known as “excessive deficit procedure” (EDP) was now appropriate.
Italy’s populist-led government had already been told by the Commission to revise its budget, due to the high level of national debt, which eurozone officials worry could cause instability for the entire bloc.
But the Rome government did not make significant changes, putting the country on a collision course with Brussels.
Underneath the rules of the sanction procedure, potential consequences incorporate a fine of 0. 2% of GDP – which for Italy’s economy would cost huge amounts of euros – and a halt on the payment of any development funds.
However , the procedure could have a long time, and Mr Dombrovskis said that he was still open to talks with Italy on how to address the disagreement.
Italy’s deputy prime minister, Matteo Salvini, told reporters he remained convinced about his government’s budget plans, and that “we will talk about it in a year’s time”.
Italy’s current government took office in June 2018 and is really a coalition of the anti-establishment Five Star Movement and right-wing League.
Widely seen as a populist coalition, the initial national budget of new government was hammered out in September,
The issue for EU officials was its high cost for a country facing massive debts. The us government planned to rack up a budget deficit of 2 . 4% of GDP to finance its plans.
The Commission wanted a lower budget cost whilst the previous government’s plans were for a 0. 8% deficit.
Italy is the third-largest economy in the eurozone, but has more than two trillion euros in debt – which is 131% of the country’s entire economic output.
To put that in context, it is 2nd only to Greece (178%), and far greater than the UK (88%) or Germany (64. 1%). The debt is the same as about €37, 000 for everyone in Italy.
The government argues that additional investment is required to kick-start the sluggish Italian economy, which includes still maybe not recovered from the financial meltdown of about ten years ago.
Italy’s statistics agency Istat forecast on Wednesday that the economy would grow by – 3% in 2019, and 1 . 1% in 2018.
While it said the budget would help boost demand in the Italian economy, its 2019 estimate is below the government’s figure of 1. 5%.
Shortly ahead of the League-Five Star government stumbled on power, Istat forecast an improvement figure of just one. 4% for 2018, plus it said on Wednesday that growth was slowing when compared to 2017.
Italy’s government hailed the budget as one that could “end poverty”.
The draft budget included the fulfilment of election promises, such as for example reversing plans to raise the retirement age and a guaranteed in full basic income of €780 (£700; $890) for poor families. Those two plans alone were expected to total about 0. 7% of Italy’s GDP.
Additionally, it included tax cuts and reforms.
Recent bad weather in Italy in addition has added major infrastructure projects to the government’s priorities – such as the aftermath of the Genoa bridge collapse in August, which raised concerns on the country’s ageing public works.