Italy refuses to budge in budget crisis
Italy’s populist government is defiantly refusing to yield to EU demands to change its costly budget for next year, with interior minister Matteo Salvini saying he “won’t budge 1mm”.
Italy is facing a multibillion-euro fine from Brussels, financial meltdown and criticism from Italian bishops as it refuses EU demands to cut its big-spending budget.
In a European Union first, Brussels rejected the budget last month, saying it represented an “unprecedented deviation” from eurozone spending rules.
The coalition of the anti-establishment Five-Star Movement and the far-right Lega appears keen on challenging Brussels to bolster its electoral support.
“We’re working on a budget that will guarantee jobs, greater rights to pensions and reduce taxes for many Italians. If Europe likes it, we’ll be happy, but if not we’ll plough on regardless,” said Salvini.
A refusal to cut spending could trigger disciplinary proceedings on November 21 and sanctions of up to €9 billion. The proceedings could drive Italian borrowing costs to crisis levels, potentially sparking a fresh eurozone crisis.
The coalition is looking to roll back pension reforms, introducing lower taxes and guaranteeing a minimum monthly income for the poor and unemployed.
The government also said paying for the recent flooding that killed more than 30 people last month and the collapse of a bridge near Genoa in August.
Luigi Di Maio, the Five-Star leader, said spending was the only way to stimulate Italy, the third-largest economy in the eurozone.
“The budget will not change, neither in its balance sheet nor in its growth forecast. We have the conviction that this is the budget needed for the country to get going again,” the anti-establishment leader said.
Italy says years of austerity have not cut its €2.4-trillion debt and believes that social spending will stimulate the economy and therefore cut the debt in the long term.
The populist coalition government was expected to stick to planned welfare spending boosts and earlier pensions paid for with a potential 2.4-per-cent deficit.
A European Union deadline to rewrite the budget has expired.
Finance minister Giovanni Tria said it would be “suicide” to follow EU debt rules.
But the increase in Italy’s borrowing costs has saddled the country with a €1.5-billion interest bill in the last six months.
Cardinal Gualtiero Bassetti, the head of Italy’s bishops, was critical of the populist administration. “If we get our maths wrong, there is no reserve bank that can save us,” the cardinal said. He said families would have to pay the bill for political blunders.
However, Salvini, who is also deputy prime minister, still appears bullish in the apparent hope of attracting anti-EU votes ahead of the European parliamentary elections next May.
Italy’s public services have already been cut. Picture credit: Flickr