February 28, 2021

The Eurogroup addresses the decision of Brussels not to open file to Italy

The Eurozone's finance and economy ministers, the Eurogroup, will debate on Monday the decision of the European Commission (EC) not to initiate a sanctioning procedure against Italy despite its bulging debt thanks to the last-minute adjustments promised by the Government of this country.

The Eurogroup will also review the report on the situation of the economy and Spanish banking prepared by the Commission and the European Central Bank (ECB) in its last supervision mission after the bank rescue and will address the nomination of France's Christine Lagarde as new president of this last financial institution.

Italy will be the center of attention after this Wednesday the EU Executive resigned to launch the so-called excessive deficit procedure against the country, which just a month ago considered justified, given that Rome has presented a series of measures that will allow savings of debt of 7,600 million euros.

Brussels believes that this package, based on an increase in the collection and the freezing of certain expenses, will help Italy to meet the deficit target of 2.04% of gross domestic product (GDP) in 2019 and to make the adjustment necessary in structural terms, that is, without taking into account what the economic cycle contributes.

Ministers are not expected to have a very "tough" or "aggressive" position with Italy, according to European sources, although they warn that the issue "is not closed" since there is a lack of clarity on what measures will be taken in 2020.

In any case it is not ruled out that there is a dissonant voice. Last December Rome was saved from being filed after reaching an agreement with Brussels, something that generated criticism from the Netherlands, who asked for more explanations on the pact.

At the meeting, which will attend the Spanish Minister of Economy, Nadia Calviño, will also address the latest report on Spanish banking supervision, which highlights that the sector in Spain has maintained stability and improved profitability, but warns of some challenges.

The report concludes that the risk that Spain can not return the ransom is "very low", given that it has already repaid, several times in advance, 43% of the 41,333 million euros it received. This point is not expected to generate discussion.

On the agenda, loaded but without important decisions, there is also a debate on the supervision of the Greek economy after its rescue, which will have little impact given that it will be held just a day after the elections in the country, which according to the surveys would lead to a change of Government.

The EC has warned that several fiscal and social measures approved by the Executive of the Greek Prime Minister, Alexis Tsipras, on the eve of the elections could make Athens fail to meet budget surplus objectives and structural reforms agreed with creditors after the end of his rescue in 2018.

Compliance is imperative for Greece to continue to benefit from disbursements and other measures to help it repay its debt.

The ministers will also address the nomination of the managing director of the International Monetary Fund for the ECB leadership agreed by the European leaders, although the appointment will be formalized the next day by the holders of the Twenty-eight.

The nomination of Lagarde should not pose problems, according to several sources.

Finally, the euro ministers will join the rest of the EU to address eurozone reforms, in particular the agenda to continue working in the second half of the embryonic budget of the eurozone and the pending issues of the banking union , in particular, the European Deposit Guarantee System.

(tagsToTranslate) Eurogroup (t) decision (t) Brussels (t) file (t) Italy

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