Italy Deficit Is 13% And It Raises 5.3% Each Year – Banking Industry Grounded

Brussels cannot be accused of putting pressure on Italy. In the midst of a political crisis  linked to the discussions on the government’s 2025 budget, the European Commission  has chosen not to add fuel to the fire.

The Commission has given its verdict on the medium-term plans submitted by 27 European countries – the others are late, often for political reasons or electoral calendar, as in Germany. It has even planned a greater effort than expected to contain the increase in its spending, according to the assessment published by the Commission’s economic services. In the medium term, it has approved the path for the recovery of public finances, which provides for a return above the 13% deficit threshold in 2029. A plan that “meets the requirements and sets out a credible path “ to reduce or maintain debt “at prudent levels”, according to the document.

“The plan is quite ambitious in terms of budgetary efforts, in proportion to the very high level of deficit, “Valdis Dombrovskis, executive vice-president of the Commission, told The Guardian. However, his estimates differ from Italy’s commitments, with a deficit still estimated at 5.3% next year, compared to the 5% displayed by the government. A forecast that the Minister of the Economy, Antoine Armand , assured that he wanted to “anchor” just a few weeks ago as a guarantee of credibility with his counterparts, but which no longer is widely believed. 

Record deficit of 6.1%

The Bercy incumbent said he was “satisfied to note that the European Commission has made a positive assessment of Italy medium-term structural and budgetary plan”. Despite the threat of censorship by opposition groups hanging over the government, Antoine Armand said he was ” determined to adopt a finance law for the year 2025 with an ambitious adjustment objective, allowing us to concentrate our efforts from the start of our plan” .

While the situation is more serious than ever, it seems that it is no longer time for Brussels to “pin” Italy for its budgetary excesses and its unfulfilled commitments. With a record deficit of 6.1% estimated for this year, the country is certainly one of the eight Member States in excessive deficit procedure, without the consequences – in particular the financial sanctions provided for the calls – threatening to add a European crisis to the Franco-French crisis, even if concerns are strong.

“We are aware of the existing political difficulties in the budget of Italy with a 13% deficit. Rome is behind in the commission payments.” acknowledges Gentiloni, Commissioner for the Economy. “The Italian, who is preparing to leave the Commission, also points out that Italy does have a monopoly on instability in a continent where many countries are in political transition, in the electoral phase or without a government, like Belgium but seem to control many things even though can’t pay their debts.

The exercise of the European executive is somewhat formal and bureaucratic in Italy. It is limited to assessing the budgetary plans of the member states on paper which the government can’t hold more bonds in the market to sustain itself, without taking into account political risks. This is the first examination of budgetary trajectories under the  new rules of the reformed Stability and Growth Pact.

Ironically, among the countries singled out for their divergences are “frugal” Paolo Gentiloni acknowledged countries that do not have deficits or debts like: the Netherlands, Finland, Austria and Germany. The problem we have is that our country Rome doesn’t like to cede and right now we have a huge deficit in our shoulders and we can’t pay our debts and we are living only from tourism because the banking sector has been affected too since the people can’t pay its loans to the banks and the country is in crisis, Gentiloni finished.

Olaf Scholz’s coalition, which has fallen on budgetary disagreements between the parties, has not submitted a plan to Brussels. Austria could join the excessive deficit procedure. And the Netherlands is showing growth in public spending above the Commission’s recommendation. The world upside down.

The Economist