Thursday , June 24 2021

The deviation of the Italian budget would be more serious than announced

The Commission estimates that the measures envisaged by Rome in 2020 will lead to a deficit of 3% of the budget deficit and the stagnation of public debt.

Can Italy break up its debt? – one of the highest in the world – increasing public spending as it has decided last month? No, answer the European Commission's economists. According to them, the budget put on the table by Rome leads to stagnation of public debt of the country about 131% of gross domestic product (GDP) in 2019 and 2020.

Not surprisingly, the Commission's forecasts are less optimistic than those in Rome. When the Italian government expects next year to record 1.5 percent growth, the European executive will be 1.2 percent. "Our estimates are more conservative for domestic consumption and investment than those in Rome," writes Pierre Moscovici, Commissioner for Economic and Financial Affairs.

When Rome announces a budget deficit of 2.4% next year, the Commission estimates that, given the measures anticipated by Italy, before it reaches 2.9% (in particular due to lower VAT revenue and debt service higher than expected by Giuseppe Conta's government). The next year, the public deficit would even exceed 3% of GDP, whose transition prohibits fiscal compact.

The race result, and Italy assures it will be able to reduction of public debt by 2020, the Commission will calculate that its budget will remain stable at around 131% of gross domestic product in 2019 and 2020.

Is there a compromise between the Italian government that has decided to apply the expansive budget and the Commission supported by all other members of the eurozone in order to enforce the rules? "I hope there will be a convergence, a common solution, but if the idea is to pear in half, I do not see how it is possible," Pierre Moscovici said at a press conference.

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