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Italy set for EU reprimand over excessive debt

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Italy set for EU reprimand over excessive debt

Pierre Moscovici - Photo EC

(BRUSSELS) - An Excessive Deficit Procedure is warranted against Italy over its rising debt, the European Commission said Wednesday in its 'Spring Package' recommendations for EU Member States' economies.

The European Semester 2019 Spring Package contains country-specific recommendations (CSRs) which are supposed to give economic policy guidance to all EU Member States for the next 12 to 18 months.

Excessive macroeconomic imbalances are found in Italy especially, recording private and public debt at historically high levels.

The EU executive recommends closing the Excessive Deficit Procedure (EDP) for Spain.

The report finds the European economy growing for the seventh consecutive year and set to continue expanding in 2020, with all Member States' economies growing 'despite less favourable conditions and global uncertainties'.

The number of people in employment is at a record high and unemployment at a record low.

At the same time, there remain 'significant differences' between countries, regions and population groups.

Against this backdrop, the Commission says effective reforms, accompanied by well-targeted investment strategies and responsible fiscal policies, 'continue to provide a successful compass for modernising the European economy'.

The decisions are not based on "a mechanistic or legalistic application of the rules, but on whether they are good for growth, jobs and sound public finances," said Pierre Moscovici, Commissioner for Economic and Financial Affairs: "Our track record shows that this is the right approach: public finances have been improving steadily without undermining growth. We also stress today the need for a number of Member States to pursue and where necessary step up efforts to tackle aggressive tax planning, in the interests of fairness to all taxpayers."

The country-specific recommendations for 2019 include stronger focus on identifying and prioritising investment needs at national level and pay special attention to regional and territorial disparities. This, says the Commission, is in line with the 'thorough analysis of investment needs and bottlenecks identified for each Member State in the country reports published earlier this year', and should serve to prioritise the use of EU funds in the next long-term EU budget, or multi-annual financial framework 2021-2027.

On progress made in implementing the recommendations, the Commission says that most has been achieved in financial services and employment policies. However recommendations to broaden the tax base, in healthcare, and competition in services, show a particularly low implementation rate.

It says stronger reform implementation across the board is crucial to strengthen the resilience of the EU economies.

The Commission has taken a number of steps under the Stability and Growth Pact. It recommends that the EDP be abrogated for Spain.

The Commission has adopted reports for Belgium, France, Italy and Cyprus under Article 126(3) of the Treaty on the Functioning of the EU (TFEU), in which it reviews their compliance with the deficit and debt criteria of the Treaty. For Italy, the report concludes that a debt-based EDP is warranted.

Hungary and Romania have been subject to Significant Deviation Procedure since 2018 and 2017 respectively. The Commission today addressed a warning to Hungary and Romania that a significant deviation was observed in 2018 and recommends to the Council to recommend they correct the significant observed deviation.

The Commission also adopted today the third report for Greece under the Enhanced Surveillance framework that was put in place following the conclusion of the European Stability Mechanism stability support programme. The report notes that Greece has made a reasonable start to the post programme environment since August 2018, but finds that reform implementation in Greece has slowed in recent months, and that the consistency of some measures with commitments given to European partners is not assured and poses risks to the achievement of agreed fiscal targets.

European Semester 2019 Spring Package - background guide

Chapeau Communication on the country-specific recommendations 2019

Country-specific recommendations 2019

Abrogation of the Excessive Deficit Procedure for Spain

Reports under Article 126 (3) TFEU for Belgium, France, Italy, Cyprus

Significant Deviation Procedure for Hungary and Romania

Third Enhanced Surveillance Report for Greece


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