Rejection it had to be, rejection it was. La European Commission rejected Draft Budgetary Plan – that is, the draft maneuver – presented by the Italian government. At this point, our country has three weeks to present a new text.
“It is the first time the European Commission has to ask to revise a budget plan – said the vice president of the EU executive, Valdis Dombrovskis, at a press conference in Brussels – Unfortunately, the answers to our questions have not been satisfactory so far. Italy does not fulfill its commitments. The EU is based on trust: if this is eroded, all the member states will be damaged, as will the single currency."
The yellow-green government, however, is determined to bring the maneuver as it is to Parliament ("there is no plan B", said the Prime Minister, Giuseppe Conte in the morning), therefore it is very probable that at the end of November the The EU will start the process to open an infringement procedure against Italy. It would be the first procedure ever activated in the EU for non-compliance with the debt relief rule, since all those launched in the past concerned the overrun of the deficit/GDP at 3%.
"We immediately understood that this was an unprecedented situation: Italy's draft budget deviates significantly from the commitments undertaken - remarked the commissioner for economic affairs, Pierre Moscovici – We are faced with an edge case. Obviously, the Commission does not intend to replace the Italian authorities in domestic economic policy decisions, for example in the fight against poverty. What worries us is the impact of these budgetary policies on citizens' lives. Public debt is the enemy of the economy and of the European peoples and the Italian one weighs 37 thousand euros on every citizen. It is a burden that suffocates the economy. And the Italian budget project, especially as regards the structural deficit, does not allow it to be reduced".
Dombrovskis recalled that “the total cost of debt coverage in Italy is among the highest in Europe. Last year Italy spent the same amount on debt financing and on education. Lax fiscal stance hurts markets, Italy and the eurozone as a whole. It is a question of guaranteeing that Italian companies can apply for low-cost loans, that families and young people can take out a home loan. We cannot leave such a high debt to the new generations”.
Moscovici then underlined that “Italy has always benefited from the support of the Commission: between 2015 and 2018 received 30 billion of flexibility to support a still fragile recovery and to defend the population from threats such as terrorism or the seismic emergency. Italy is also the second beneficiary of the structural funds with 45 billion euros. In conclusion, the Commission is not an obstacle to Italy's growth, but an ally".
The French commissioner then sent a signal of détente towards Rome: “Italy now has three weeks, but we urge the Government to send us a new document as soon as possible. Today is not the final stage of this journey, we are only at the beginning. Our door is always openespecially against Giovanni Tria, who is our natural interlocutor, a credible and legitimate interlocutor. We hope that he will be able to convince the Italian government of the need to change the manoeuvre. Tria himself pointed out in his letter to the Commission is Italy's place is in the Union and in the euro. We really appreciated that passage: we absolutely agree”.
THE GOVERNMENT'S REACTION
The reaction of the two deputy prime ministers was furious who, from a distance, replied to the EU commission. Responding from Bucharest, where he is on an institutional visit, to questions from journalists, Matteo Salvini he attacks “the bureaucrats of Brussels” head-on: “You are not attacking a government, but a people. The only body that can improve the Italian maneuver is the Italian parliament,” he added, answering reporters' questions about Brussels' criticism.
Instead, as usual, Facebook is entrusted with the reaction of Luigi Di Maio: “It is the first Italian maneuver that the EU does not like. I'm not surprised: it is the first Italian maneuver to be written in Rome and not in Brussels!”, comments the deputy prime minister in a post.
“With the damage that the previous ones had done – continues Di Maio – we certainly could not continue with their policies. We will continue to tell the European Commission what we want to do with respect. But there must be equal respect for the Italian people and the government that represents them today. We continue to work head-on for the good of the citizens”.
The Speaker of the Chamber, Roberto Fico, tries to tone down the tone: “There will, in my opinion, be constant interlocution between the Government and the European Commission. It doesn't seem to me that there are dynamics of one against the other, but dynamics of explanation of Italian and European interests”. Still no comments from the Minister of Economy and Finance, Giovanni Tria, and from the Premier, Giuseppe Conte.
THE REACTION OF THE MARKETS
After the press conference of Moscovici and Dombrovskis, lo spread between BTp and Bund – which closed yesterday at 303 basis points and dropped below 300 in the late morning – climbed back to 312.
Same trend for the interest rate on the Italian XNUMX-year: after having retraced at the start of the session to 3,43% from 3,48% at yesterday's close, it returned to 3,52%.
Meanwhile, Business Square it closed the session down by 0,85%, having reached a low of -1,14%.
