The European Commission has
decided to reject the Italian budgetary planning document and to
ask for a new one which must be sent to Brussels within three
weeks, the EC said Tuesday.
European Commission Vice President Valdis Dombrovskis said
that the EU executive had no choice but to reject Italy's budget
plan.
"I'm very sorry to be here today," Dombrovskis told a press
conference after a meeting of commissioners.
"For the first time the Commission is forced to request a
State to revise its budget plan document. But we don't see any
alternatives. Unfortunately, the clarification received
yesterday was not convincing".
Dombrovskis said "the Italian government is openly and
consciously going against the commitments made towards itself
and towards the other member States" after rejecting the 2019
budget.
In May the European Commission decided not to open an
infraction procedure for excessive debt "because Italy was
substantially in line with the rules" but "the current plans are
a material change that could require a revaluation", Dombrovskis
said, saying "the ball is now in the Italian government's court,
we have three weeks for an intense dialogue which we face in a
constructive way".
Dombrovskis said "breaking the rules may seem a temptation at
first glance, it may give the illusion of getting off without
consequences", just like trying "to cut the debt with more
debt", but "at a certain point the the debt gets so close that
it becomes too heavy and ends up not having freedom for all".
He said "we have been tasked by all member States with
maintaining the common commitments", it is "our duty", because
"confidence is crucial".
Dombrovskis said the Italian budget plan risked harming the
whole bloc as he explained the decision to give the package the
thumbs down.
"Europe is built on cooperation. The eurozone is built on
close bonds of trust... with rules that are the same for
everyone," Dombrovskis told a press conference.
"If the trust is eroded, all the member States are damaged,
our union is damaged.
"If a looser fiscal policy hits confidence, in reality it can
have the opposite effect on growth".
European Economic Affairs Commissioner Pierre Moscovici said
that "we are leaving a chance for dialogue".
The decision to reject the budget, he said, "doesn't mean
that our doors are closed", on the contrary it is an invitation
for "constructive dialogue" on which "I welcome (Economy)
Minister (Giovanni) Tria's commitment in that direction" in
Monday's letter to the EC.
"I'm certain the European Commission is not a brake" but "an
ally for growth", he said.
Tria remains a "credible interlocutor" even after Italy's
budget rejection, Moscovici said.
Tria, he said "is still a credible and legitimate
interlocutor" and "we hope that he is able to convince the
Italian government of the need" that the budget should be
"compatible" with EU rules and "the common commitments taken".
Deputy Premier Matteo Salvini said after the EC rejection
that "they're not attacking a government, but a people. They are
things that make Italians even more irritated and then some
people complain that the European Union is at the lowest point
of its popularity".
Deputy Premier Luigi Di Maio said the government is on the
right track with the budget that was rejected by the EU and
won't stop.
"We know we are the last bulwark safeguarding Italians'
social rights. And that's why we won't disappoint you, WE know
that, if we were to give in, the pro-banks and pro-austerity
'experts' would swiftly return. And so we won't give in. We know
that we are on the right track. And so we won't stop".
The rejection was widely expected because of what the EC
sees as an unacceptably high deficit of 2.4% of GDP next year.
The EC said last week this amounted to an "unprecedented"
breach of the Stability and Growth Pact.
The EC also says the budget's growth forecasts are
unreasonably optimistic.
The spread between Italian and German 10-year bond yields, a
gauge of investor confidence, rose back to 315 points with a
yield of 3.55% after the EC's thumbs down.
Premier Giuseppe Conte said ahead of the rejection that
"there is no plan B."
Taking to Bloomberg, he said "I have said that the deficit at
2.4% of GDP is the ceiling. I can say that this will be our
ceiling".
Asked if there might be substantive change to the budget
after the EC's No, Conte said "for me that would be difficult, I
couldn't accept it".
Conte added that "we are not gamblers gambling our children's
future on the roulette wheel" and stressed that "economic growth
is the best way to get out of the debt trap".
He added: "I can assure you that this executive will not take
Italy out of Europe. We feel at home in Europe and think the
euro is and will be our currency, the currency of my son who is
11 and that of my grandchildren".
Conte also said that the government would conduct a spending
review if necessary.
"We are ready to make spending cuts in 2019," he said.
There is no turning back on the 2019 budget plan, Deputy
Premier Matteo Salvini said ahead of the EC rejection.
"The only organism that can improve the budget is the Italian
parliament," he said.
"We're not going to take even a cent from the pockets of the
Italians. We listen to everyone but we won't go back".
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