The European Commission has decided this Wednesday, after the cuts announced by the Italian authorities this week, not to propose the opening of an Excessive Deficit Procedure (EDP) for the breach of Italy in the limits of public debt, which stands at 132 % of GDP.
On June 5, 2019, the Commission evaluated the Italian budget in 2018 and the fiscal forecasts for 2019 and 2020, and concluded that an excessive deficit procedure was justified.
This conclusion was supported by Ecofin on June 11, 2019, which claimed Italy "the necessary measures to guarantee compliance with the Stability and Growth Pact", adding that "other elements that Italy could present" could be taken into account. .
So, this Monday, in the European Council for the distribution of power of the EU, just back from the G-20 Osaka, the Italian government adopted its budget for the remainder of 2019, as well as a decree law that includes some adjustments for 2019 of 7.6 billion euros, 0.42% of GDP in nominal terms.
And how does the Italian Government balance the decrease in debt by 7.6 billion? With a correction of 6,100 million in revenues and with the freezing of 1,500 million in expenses. This will allow it to reduce its structural deficit by 0.3 points, instead of the expected 0.2, which does not take into account the economic cycle and which the EU uses to assess respect for fiscal discipline.
As a result, Italy's deficit is expected to reach 2.04% of GDP by 2019 (compared to 2.5% calculated in the spring forecasts of the European Commission), which was the target set in the budget of 2019 approved by the Italian Parliament.
The reduction in structural terms is slightly higher, amounting to 8,200 million euros or 0.45% of GDP, which leads to an improvement in the structural balance of around 0.2% of GDP (compared to a deterioration of 0%). , 2% in the spring forecast of the 2019 Commission).
The difference compared to the nominal amount is due to the lower than expected income from the tax amnesty of around 600 million euros, which worsens the fiscal objective in nominal terms but not in structural terms.
These figures do not take into account the flexibility of 0.18% provisionally granted to Italy for "extraordinary events", related to the collapse of the Morandi bridge.
Taking into account the provisions adopted on July 1, the European Commission expects "Italy to fully comply with the required effort under the preventive arm of the Stability and Growth Pact in 2019. In addition, the additional fiscal effort made by the government by 2019 is such that it also partially compensates for the deterioration in the structural balance registered in 2018. "
Finally, with respect to 2020, "the Italian government has reiterated its commitment to achieve structural improvement through a new expenditure review, as well as an improvement in projections," as it said in a letter sent on July 2. to the Commission the Prime Minister Giuseppe Conte, and the Minister of Economy and Finance, Giovanni Tria.
In any case, Brussels announces that "the Commission will keep under surveillance the effective implementation of this package: it will closely monitor the execution of the 2019 budget and will evaluate the fulfillment of the 2020 budget plan project with the Stability and Growth Pact".
Pierre Moscovici, Commissioner for Economic and Financial Affairs, said: "The objective of the Stability and Growth Pact is not to punish, it is to ensure that governments pursue sound public finances and correct problems quickly when they occur. I am pleased to note that this is the case today".
(tagsToTranslate) Brussels (t) procedure (t) excessive deficit (t) (t) Italy