The Eurogroup will deal with the Italian budget and the reform of the eurozone
The Economy and Finance Ministers of the Eurogroup will hold a meeting tomorrow in which they will address the European Commission's rejection of the Italian budget draft and will continue negotiations to agree on a reform package for the eurozone in December.
The ministers will discuss the budget drafts of the euro countries after the Commission has sent letters to some, including Spain, asking for clarifications on the accounts, but European sources admit that they will focus on Italy after the unprecedented return of their project .
Last week the Community Executive gave the Government of Rome three weeks to send a revised draft after verifying that, despite its previous warnings, the plan referred to contemplates an unprecedented deviation with respect to the adjustment required to the country.
Brussels asked for a reduction of 0.6% of GDP in its structural deficit but Rome plans an expansion of 0.9%, leading the deviation to 1.5% in a country whose debt exceeds 131% of GDP.
If the government of the anti-system Five Star Movement and the extreme right-wing League does not propose changes, as it has advanced, the Commission could open an excessive deficit procedure to Italy, which could ultimately lead to sanctions.
European sources said that ministers are expected to support the Commission's opinion, but said that the next steps will not be discussed since Rome still has time to change its draft.
They added that, at the moment, contagion to other countries of the euro hardly is appreciated.
In this regard, from the Spanish Ministry of Economy said that all countries want to avoid any "additional instability" and stressed that the situation in Italy "is very different from the others, both in debt and in the action that is taking its Government".
"The position of Spain is in the antipodes, it is a very firm commitment of debt reduction (...) and with budgetary stability, so far the markets have been able to discriminate against it and we believe that it will continue to be so," said sources of this ministry.
They added that they have already sent the Commission additional information on the budget draft as requested in the letter sent to them on October 19, in which they warned of the risk of deviation from the recommended adjustment.
The Spanish Minister of Economy, Nadia Calviño, is not expected to expose the situation to her counterparts.
In a second part, with all the countries of the European Union except the United Kingdom at the table, the ministers will address the reform of the eurozone.
Specifically, they will deal with the European Deposit Guarantee System, the fund to insure deposits of less than 100,000 euros regardless of the country in which they are located, which is the most controversial and slow point of negotiations.
They will also continue to negotiate the details of the new powers of the European Stability Mechanism (the European rescue fund), after they agreed that they would be responsible for providing the firewall for the Single Resolution Fund, an instrument that would be used as a last resort to fund resolutions of large European banks.
In addition, the chairperson of the Single Resolution Board, Elke König, and the Single Supervisory Mechanism, Danièle Nouy, will make their semi-annual presentation of the work of both organizations.