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  • Italy President Sergio Mattarella

    Italy President Sergio Mattarella | Photo: Reuters FILE

Published 21 November 2018

The EU Commission will report draft budget 2019, austerity measures and possibly fines are expected in Italy's near future.

On Wednesday, the European Commission will begin to take steps toward enforcing alleged “disciplinary” measures on Italy regarding its draft 2019 budget.

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“It would be a big mistake for the European Commission to try to deal with Italy the same way they dealt with Greece, imposing a very tough constraint on the budget, a strong austerity policy because Italy is not Greece,”  Spanish Foreign Minister Joseph Borrell, a socialist politician, said.

According to Reuters, the commission will have to state in their report that Italy is in breach of its 60 percent debt to gross domestic product (GDP) ratio. Italy’s debt is currently 131 percent of its GDP.

But according to Italy’s economy minister, Giovanni Tria, France had been given greater flexibility to handle its budget, in recent years.

Italy’s response to the commission has so far been one of speeding up privatizations as a means to decrease debt. The country's conservative and far-right alliance government is pushing to boost spending to “kickstart the economy.”

The commission’s role is to check the draft budgets to ensure they comply with the EU limitations on deficit and debt before they go to vote, in Italy’s parliament. If the commission evaluates that there is an excessive deficit it has the power of imposing fines equal to 0.2 percent of the country’s GDP, a move that would require the support of the EU’s deputy finance ministers.

Italy has, so far, skirted the EU’s austerity measures because of the implementation of a so-called Stability Growth Pact, but the government switched tracks and is now looking for means to expand its budget, a move which will likely generate rejection by the commission.

According to Dean Baker, from the progressive Washington D.C.-based Center for Economic and Policy Research, the adjustment measures suggested by the EU Commission will have the greatest impact on workers. “Clearly the intention of the EU Commission is to impose the pain of adjustment on Italy’s workers." 

Yet, Baker believes the effect can be attenuated.

“But the logic of adjustment does not require that workers bear the pain, or least not that they bear the pain alone. Italy must reduce its domestic price level relative to the price level in Germany. The Eurozone authorities would see lower prices come about from lower real wages, but reductions in other costs can also help to lower prices in Italy.”

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