Italy's budget inflexibility likely to widen divide with EC

Titian  Wikimedia CCTitian’s Europa The economy was bullish for a while but not right now

If the report shows that Italy is failing to comply with rules on reducing its debt - which is more than twice the European Union limit - then that could trigger the so-called excessive deficit procedure, a process that could eventually lead to financial sanctions for the government in Rome. The Commission will rule on that plan, as well as the others in Europe, on November 21.

"We are looking to a constructive discussion with Italy", he said.

But Italian Finance Minister Giovanni Tria remained steadfast, promising an explanation of its plans to the commission but saying Rome would not abandon its spending boost, that he assured would deliver growth.

On his way into talks Monday with finance ministers from countries that use the euro, European Economy Commissioner Pierre Moscovici said that "when a member does not respect the rules it has an impact on the others".

"If you share a currency with many other countries, we all have responsibilities to each other and those responsibilities are now articulated in the rules that the European Commission oversees", Mr Donohoe told reporters on entering.

Italy has until 13 November to provide a revised budget, otherwise it will be exposed to an "excessive deficit procedure", which could lead to financial sanctions.

Italian leaders insist the low growth rate is all the more reason to kickstart the economy through a spending spree, but Brussels fears the rising deficit could further feed Italy's exploding debt.

"On Nov. 19 we'll hold an extraordinary Eurogroup here in Brussels and this meeting will be mostly dedicated to euro-area reform", Eurogroup President Mario Centeno tells reporters after the meeting.


"This fight is going to be with us for a while", a eurozone diplomat told AFP.

The discussion comes as Italy is asked to submit revised spending plans by November 13, after the European Commission essentially rejected the country's budget for 2019, saying that it constitutes a clear deviation from commonly agreed fiscal rules.

In question: the deficit of 2.4% of gross domestic product (GDP) for 2019 presented by the populist coalition in power in Rome, formed by the League (far right) and the Five Star Movement (M5S, antisystem), very above what was foreseen by the previous center-left government (0.8%). "Italy will never kneel again".

"Of course, the growth numbers are important for that outlook, too, and those have been on the weaker side so I think it's really that mix that is going to be important for the outlook in Italy".

The coalition's 2019 budget is based on the country experiencing an annual growth of 1.5 percent - a figure considered optimistic by the International Monetary Fund, which has forecast only one percent.

Many officials say that, should Rome's borrowing costs on the market - already elevated on concern over the 2019 budget - rise to unsustainable levels, there would be no political will in the euro zone now to bail the country out.

The much watched "spread" - the gap between German and Italian bond yields - has grown to around 300 basis points, up from around 130 in the first quarter of 2018.

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