Click:niche brands

The European Commission on Wednesday took the first step in launching a disciplinary process against Italy over the populist government’s defiance of EU spending rules.

The move came six months after the Commission and the Italian government struck a compromise to avoid triggering the process, which could lead to a €3.5 billion fine, although Brussels has shied away from imposing such penalties in the past.

The Commission’s decision to launch the Excessive Deficit Procedure (EDP), a program intended to bring government spending back in line with EU rules, highlighted Rome’s isolation on the EU stage. Also on Wednesday, the Commission released Spain from the procedure, meaning Italy is the only country now with a financial black mark against it from Brussels.

“We look at [Italy’s] main macroeconomic indicators, and they are all flashing red … [the] budget deficit is growing, public debt is growing, growth is slowing down,” European Commission Vice President Valdis Dombrovskis told reporters in Brussels.

Dombrovskis lamented “the damage recent policy decisions are doing” to the Italian economy.

But the Italian government — made up of the far-right League and the anti-establishment 5Star Movement — sounded a defiant note, saying higher public spending is necessary to reboot Italy’s struggling economy.

“We don’t want other [countries’] money, we just want to invest in jobs and growth,” Matteo Salvini, deputy prime minister and League leader, said on Wednesday after the Commission’s announcement.

“The only way to reduce the debt created in the past is to cut taxes and allow Italians to work more and better … With cuts, sanctions and austerity, debt, poverty and unemployment grew. We must do the opposite,” he added.

The 5Stars’ European Parliament delegation issued a statement saying: “The Commission is once again applying double standards… Italy is the only country at risk of being sanctioned while others — like Germany and The Netherlands — have been ignoring EU parameters with their enormous surpluses.”

The Commission will now ask the Council of the EU to formally launch the EDP. The Council is widely expected to give the green light within two weeks.

More spending

EU rules require countries to keep their public debt under 60 percent of gross domestic product and their deficit below 3 percent of GDP. While Italy’s deficit is still below the 3 percent ceiling, its public debt stands at 132 percent of GDP and is projected to rise further.

Click Here: South Africa Rugby Shop

The flagship policies of the two governing parties — including a pensions reform allowing workers to retire early and a so-called citizens’ income for poor jobseekers passed in this year’s budget — will mean more public spending. According to the Italian treasury’s own estimates and the Commission’s forecasts, such measures will fail to trigger growth or reduce debt.

The Commission in December told Italy it could increase its budget deficit to 2.04 percent of GDP to avoid increasing the country’s debt pile. Instead, Rome’s deficit has increased to 2.5 percent this year and is set to reach 3.5 percent in 2020.

The Italian government’s domestic opponents said the Commission’s latest move was proof the League and 5Stars were unfit to run the economy.

“They’ve plunged the country into an abyss, and the EU is presenting the bill for their insanity,” said Giorgio Mulé, an MP with the center-right Forza Italia party.

Rome can still avoid punishment if it convinces Brussels that it will conform to the EU’s spending rules. Prime Minister Giuseppe Conte, on a visit to Vietnam, promised “we will try our best to avoid the formal opening of the excessive deficit procedure, which clearly doesn’t do our country any good.”

And the EU’s commissioner for economic and financial affairs, Pierre Moscovici, said Brussels remains keen to talk: “My door is open …we’re happy to discuss and listen to what [the Italians] have to say.”

Previous cases suggest Brussels’ budgetary bark is worse than its bite. Spain and Portugal, for example, escaped fines three years ago after failing to correct their budget deficits.

At least some in the Italian government are betting that Brussels will blink first once again. “These procedures have never ended in sanctions, it was clear they were going to suggest it, but they can’t ultimately sanction a government that has over 50 percent of the people on its side,” a League official said.