Italy is standing tall on its budget for the next fiscal year, despite the European Union’s disapproval of it.
The EU Commission has again rejected Italy’s proposed budget on Wednesday, paving the way for financial sanctions to be applied in the next few months.
The specific bone of contention centers, mostly, on projected budget deficits as a per cent of GDP. The Italian budget deficit works out to 2.4% of GDP, the Italians say, which is well within the 3.0% EU limit; however, the EU Knows Better: the Commission claims the deficit will exceed 3.0% by 2020. Whom to believe….
One indication of integrity is this. Italy’s debt-to-GDP ratio currently stands at 130% of GDP, which is well above the EU-recommended upper bound of 60%. In the Commission’s view, though, that recommendation is an EU mandate, and it’s demanding that Italy also act to reduce its debt-to-GDP ratio.
Or there will be consequences.
[I]f Italy still fails to comply [on the budget deficit matter], the Commission can apply financial sanctions, which can include fines up to 0.2% of GDP….
Another indication. The EU thinks the Italian government is spending too much, so it will punish the nation by making the Italian government spend even more.
Other member nations need to take notice as they contemplate their own future in the EU.