European Commission calls for Italy to be sanctioned over debt pile
The European Commission has recommended that Italy be sanctioned for failing to tackle its soaring levels of public debt.
As part of its regular review of how member states are complying with the European Union’s fiscal rules, the EC said that in 2018, Italy’s public debt-to-GDP ratio was 132.2%. That was the second-largest ratio in the union and one of the biggest in the world, representing “an average burden of €38,400 per inhabitant”.
The EC conceded: “Low productivity growth keeps constraining Italy’s growth potential and hampering a faster reduction of its public debt ratio.”
“However, Italy has made limited progress in addressing the 2018 Country-Specific Recommendations, and the structural reform agenda outlined by the 2019 National Reform Programme contains only piecemeal measures building upon past reforms in different areas and backtracks on elements of major reforms adopted in the past.”
It concluded: “Overall, the analysis suggests that the debt criterion as defined in the Treaty should be considered as not complied with, and that a debt-based EDP is warranted”.
An EDP, or excessive deficit procedure, allows the EC to sanction countries for breaking fiscal rules.
Member states now have two weeks to approve the EC’s recommendation. If the EDP goes ahead, Italy could face a hefty fine, with deputy prime minister Matteo Salvini claiming last month that it could be as much as €3bn.
The report is the latest twist in the ongoing row between Italy’s coalition government and the EC. Despite the high level of debt, Rome wants to cut taxes and increase spending, and has already broken a budget deficit agreed between Brussels and the former government.
Valdis Dombrovskis, EC vice-president for the euro and social dialogue, financial services and markets, tweeted: “For Italy, there is a path to recovery and growth. Other countries have already taken it, with success. This path follows a renewed reform effort to address long-standing structural weaknesses in its economy.”