The European Commission on
Thursday revised its forecasts for Italy's budget deficit to
2.9% of GDP in 2019 and 3.1% in 2020.
This was because, it said, of expensive measures in the 2019
budget including a basic income, reform of the Fornero pension
reform, and public investments, all of which, the EC said, "will
significantly increase spending".
The EC said the figures do not take into account the
so-called safeguard clauses, that is a VAT hike, given its
"systematic sterilisation" by successive governments.
The Commission said in its autumn forecasts that Italy's
public debt would "remain stable around 131% (of GDP) throughout
all the period of the forecasts, that is from 2018 to 2020.
This was due, it said, to the "deterioration of the deficit,
united with the risks of lower growth".
European Commission Vice President for the Euro Valdis
Dombrovskis said "uncertainty and risks, both internal and
external, are on the rise and are beginning to weigh on the pace
of economic activity".
Italy's planned efforts to boost growth could "prove to be
less effective" than hoped, the EC said.
The Commission said they could have "a lower impact on
growth".
As well, it said, a higher spread could pose risks to Italian
banks.
The revised deficit forecasts, compared to the government's
estimate of 2.4% next year, could change if the 2019 budget
does, European Economic Affairs Commissioner Pierre Moscovici
said.
"Our forecasts differ from the government's, because of our
growth forecasts, which are more conservative, and spending
forecasts that are higher in particular for the higher spending
on interest," he said.
"These forecasts are made on the basis of the Budgetary
Planning Document received on October 16, but the situation
could be different when the answer comes" from the Italian
government, he said.
The government must reply by November 13 to the EC's letter
asking for a revised package due to an "unprecedented" deviation
from the Stability and Growth Pact.
If the budget does not change, as the Italian government has
vowed, Italy risks infraction proceedings for excessive debt.
The two deputy premiers, 5-Star leader Luigi Di Maio and
League leader Matteo Salvini, have said they will present an
unchanged package.
As well as the basic income for job seekers and the poor and
a pension reform to allow those with a combined total of 100
from their ages and their years of contributions to retire four
years earlier on lower pay, the budget also contains a dual tax
for the self-employed.
photo: Dombrovskis (R) with Economic Affairs Commissioner Pierre
Moscovici
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