Italy knows "that it has chosen an approach not in line with the name of the Stability and Growth Pact". However, he believes that it is a “difficult but necessary” decision, because the country's growth is struggling to recover e the most disadvantaged sections of society live in "dramatic conditions". That's what we read in letter that the Minister of the Treasury, Giovanni Tria, sent today to the European Commission. The text is the government's response to the Community Executive, which on 18 October, always by letter, had criticized the public accounts envisaged by the new Italian budget law, asking for explanations in Rome.
Tria in fact sends the reliefs arrived from Europe back to the sender, clarifying that Italy has no intention of changing the manoeuvre to make it consistent with the commitments undertaken by our country on the consolidation of public finances. The budget lawit does not expose the financial stability of Italy or of the other countries of the European Union to risk – reads the document – In fact, we believe that strengthening the Italian economy is also in the interest of the entire European economy”.
However, the number one of the Treasury also writes that the government "it does not want to further expand the structural deficit in the next two years and undertakes to bring back the balance towards the medium-term objective starting in 2022”. Furthermore, "should GDP return to its pre-crisis level sooner than expected, the government intends to bring forward the return path".
As for the non-compliance with the European rule on debt reduction-GDP, Tria underlines that Italy intends to focus on increasing the denominator, i.e. on a "acceleration of growth”, because he considers “the current macroeconomic and social conditions particularly unsatisfactory”.
The debt-GDP should fall thanks to the "relaunch of the public investments, which will benefit not only from greater resources but also from regulatory simplifications and new capacity building tools”.
On the side of economic forecasts, Tria argues that those contained in the maneuver are based on a multiplier "entirely in line with the usual estimates of budget multipliers": against a budget law that "increases the deficit by 1,2 points", the impact on growth is estimated at an additional 0,6 points.
"The government - concludes Tria - is therefore confident that it will be able to restart investment and GDP growth and that the recent rise in government bond yields will be reversed when investors know all the details of the planned measures”.
At the press conference, the Prime Minister, Giuseppe Conte, he commented: “We are not a gang of rowdy and undisciplined. We have worked for a long time, we have reviewed the trends and fundamentals of the Italian economy, and after having studied so much we have come to the awareness that if we had continued on the same path, Italy would have entered a recession and we would have worsened the public finances”.
And again: "If an EU commissioner before reading the maneuver and before the EU letter arrives tells me that this maneuver will be rejected, I say that it is a prejudice and that it is unacceptable that it comes from someone who represents an institution" like the EU, continued Conte, probably referring to the words of the budget commissioner Oettinger in recent days. Who from the EU commission "prejudiced" Italy's manoeuvre, "specified that his opinion is personal, but when you represent an institution, personal opinions must not be expressed".
What will happen at this point? Based on the answer, the Commission will decide by 31 October whether to consider the Italian budget project in compliance with the stability pact and with the commitments already undertaken by Italy or whether ask for changes. It is practically certain that he will choose the second option. Until now, in the history of the Eurozone, it has never happened that Brussels rejected a budget law even before the text arrived in Parliament.
