Conte hails budget deal with EU
Italian Prime Minister Giuseppe Conte (pictured) said the deal with Brussels allowed his government to honour its main commitments and stimulate the economy.
However, Italian businesses have already expressed concern that the budget contains little to spur investment.
Italy has agreed to lower its deficit target for next year from 2.4 to 2.04 per cent of gross domestic product.
Italy has about €2.3 trillion of public debt and last month the Bank of Italy said the cost of servicing the extra debt on the original deficit target of 2.4 per cent could rise to €5 billion next year and €9 billion in 2020.
Rome’s projections now operate on the basis of growth forecasts the EU considers more realistic.
The European Commission’s Vice President Valdis Dombrovskis, former prime minister of Latvia, said the deal was “not ideal” but allowed the EU to avoid taking legal action against Italy “provided that the measures are fully implemented”.
Conte hailed the agreement when addressing parliamentarians today (Wednesday), saying he had resisted calls for deeper cuts and protected policies.
“Over the last few weeks we worked to bring the positions closer without ever moving backwards with respect to the objectives the Italian people set us in the March 4 election,” Conte said.
“The economic-financial estimates about the measures that attracted the most attention of our European partners revealed that the resources [required] were less than forecast.
“At the end of tough negotiations, conducted with tenacity, we have reached a point of sustainable equilibrium, sticking to a higher [debts] than that deemed appropriate by Europe,” Conte told Italian senators.
As a share of the economy, Italy’s debt is the second highest in Europe, after Greece, at over 130 per cent of GDP.
Brussels can enforce sanctions when members breach or are risk breaching the deficit threshold of 3 per cent of GDP or if government debt exceeds 60 per cent of GDP. But the majority of member states, including Germany, exceed the 60-per-cent target for the national debt.
Italy’s coalition government of the far-right, anti-immigrant Lega and the populist, anti-establishment Five-Star Movement hoped for budget measures to cut taxes and the retirement age while establishing a universal basic income.
It has been questioned whether the populist coalition’s policies are really what Italians want.
A poll by EMG Aqua last week estimated that 41 per cent of Italians supported cutting the public debt, lowering the retirement age was seen as a priority for 22 per cent, a flat tax was prioritised by 10 per cent and universal basic income was important to 9 per cent of respondents.
Italian Prime Minister Giuseppe Conte. Picture credit: Kremlin