New Europe: Rome resists fiscal consolidation calling for Eurozone reforms24 September 2018 | 09:53 | FOCUS News Agency
Italy remains on a collision course with Brussels over the budget deficit, with the government and the ECB’s Mario Draghi calling for a more systemic approach to the Eurozone’s crisis-management arsenal.
The Commissioner asked Italy to target “wasteful spending” and prioritise investment to help stimulate growth. However, in a statement to Reuters he called on the Italian government to remain a “(…) credible country willing to secure that its debt is under control.”
Meanwhile, in Rome, there is little appetite for measures that will either increase revenue or reduce spending. On Thursday, Deputy Prime Minister Luigi Di Maio reiterated that there would not be a VAT hike.
Throughout the week, the leader of the Five Star Movement (MS5) dismissed rumours of dismissing the Minister of the Economy, Giovanni Tria. However, he has confirmed that he expects him to find the fiscal space to deliver on flagship policy commitments, that is, a citizens’ minimum guaranteed income of ?780, a rollback in pension reforms (Fornero law), and the introduction of a two-tier flat tax (15% and 20%).
Finding a fiscal balance is increasingly difficult, as the OECD moved on Thursday to cut growth projections for Italy from 1,4% to 1,2% for 2018 and 1,1% for 2019.
The Italian government is due to deliver its official budget plan this coming week.
The Minister of the Economy, Giovanni Tria, has reiterated a commitment to a budget deficit of 1,6% for 2019. That is twice as big as the 0,8% envisaged from the previous administration; however, he is under pressure to deliver on policy commitments.
Given the pressure to increase spending and reduce the overall tax burden, delivering on the 1,7% deficit target becomes more difficult both for this year and the next. The OECD report on Thursday suggested that the Italian government should refrain from rolling back the 2011 pension reforms. Hours later, Di Maio commented that the Paris-based think tank should refrain from interfering in Italian affairs.
While Rome is not badging, there are increasing calls for “systemic reforms.”
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