EU puts Italy on notice over spend-happy budget

The European Commission formally put Italy on notice Wednesday for its deteriorating deficit and huge debt, re-opening a battle with populist-led Rome.

Published: 5 June 2019 13:03 CEST

EU puts Italy on notice over spend-happy budget

Has Italy made spending promises it can't keep? Photo: Vincenzo Pinto/AFP

The move by the EU's executive arm against Italy's bloated budget begins a complicated process that — if approved by eurozone ministers — could result in a fine of more than €3 billion.

“We have concluded that … a debt-based excessive deficit procedure is warranted for Italy,” EU commission vice president Valdis Dombrovskis told reporters, adding that bloc ministers must confirm the decision.

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Italy's nationalist Deputy Prime Minister Matteo Salvini on Saturday vowed not to yield to the EU, with fears that his fractured government could collapse under the pressure from Brussels.

The coalition of the hard-right League and anti-establishment Five Star Movement is deeply divided on how to handle the offensive by Brussels, with Prime Minister Giuseppe Conte threatening to resign if the squabbling did not stop.

Five Star deputy prime minister Luigi Di Maio reacted angrily to the EU's warning, saying: “We bear all the weight, and as if that weren't enough, they're lecturing us… We will go to Europe and discuss responsibly, so we can construct and not
destroy. But it's tough, when you see that every day they find another reason to say bad things about Italy and this government.”

Italy's public debt is a big problem and now sits at €2.3 trillion, or 132.2 percent of Italy's GDP — way above the 60 percent EU ceiling. The debt mountain leaves Italy very vulnerable to its cost of borrowing on financial markets that reward governments that adopt a more conciliatory attitude to Brussels.

Italian Finance Minister Giovanni Tria on Friday told Brussels that his government would do what it takes to rein in its soaring public debt, but without providing details.

Making matters worse, Italy on Friday revised its growth figures downwards for the first quarter of this year, putting spending commitments made to the EU even further out of reach.

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Italy's finance minister, Giovanni Tria, in Brussels. Photo: Emanuel Dunand/AFP

The feud with Rome comes just months after an earlier flare-up over Italy's draft budget for 2019.

Last year's technical recession had put intense pressure on the government in the eurozone's third largest economy, which won power in June on the back of big-spending electoral promises that ignored EU rules.

In a historic first, in October the Commission rejected Italy's budget, which promised a universal basic income and scrapped pension reform. The government was forced to water down its costly budget in December to avoid punishment and soaring borrowing prices on the markets.

The EU's tough attitude comes under the insistence of Netherlands and Germany, which want eurozone partners to strictly abide by budget rules despite arguments that doing so stokes populism.

The threat to put Italy into the sin bin comes on the same day that the commission officially proposed to remove Spain from the procedure, with Brussels satisfied that Madrid's public spending was back in order a decade after the financial crisis.

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The strike comes after Albanian Prime Minister Edi Rama — who is close to Meloni — called a top RAI editor to complain about a television report into Italy’s controversial migration deal with his country.

The Usigrai trade union called the strike from May 6 to May 7 saying talks with management had failed to address their concerns.

It cited numerous issues, including staff shortages and contract issues, but in first place was “the suffocating control over journalistic work, with the attempt to reduce RAI to a megaphone for the government”.

It had already used that phrase to object to what critics say is the increasing influence over RAI by figures close to Prime Minister Meloni, who leads Italy’s most right-wing government since World War II.

However, another union of RAI journalists, Unirai, said they would not join what they called a “political” strike, defending the return to “pluralism” at the broadcaster.

Funded in part by a licence fee and with top managers long chosen by politicians, RAI’s independence has always been an issue of debate.

But the arrival in power of Meloni — leader of the far-right Brothers of Italy party, who formed a coalition with Matteo Salvini’s far-right League party and the late Silvio Berlusconi’s right-wing Forza Italia — redoubled concerns.

Tensions erupted at the weekend amid accusations RAI censored a speech by a leading writer criticising Meloni ahead of Liberation Day on April 25, when Italians mark the defeat of Fascism and the Nazis at the end of World War II.

Both RAI’s management and Meloni have denied censorship, and the premier posted the text of the monologue on her social media.

In another twist, Albania’s premier confirmed Thursday he called senior RAI editor Paolo Corsini about an TV report on Sunday into Italy’s plans to build two migration processing centres on Albanian territory.

Rama told La Stampa newspaper the report was “biased” and contained “lies” — adding that he had not raised the issue with Meloni.

The “Report” programme claimed the costs of migrant centres, which are under construction, were already “out of control” and raised questions about criminals benefiting from the project.