EU Warns Italy, France Over Budget Overspending

BRUSSELS (AFP) — The EU warned Italy, France and six other countries Wednesday that they risk breaching the bloc’s tough public spending rule next year, putting particular pressure on Rome to deliver reforms.

European Commissioner for Economic and Financial Affairs Pierre Moscovici talks to journalists during a Nov. 7, 2019, news conference at the European Commission headquarters in Brussels. The European Union’s executive branch has cut its growth forecasts for the 19-country eurozone for this year and next and warned that conditions could worsen in the face of an array of uncertainties. (AP Photo/Francisco Seco)

For the first time since 2002, however, the European Commission is not taking legal action against any of its members over high budget deficits or debt.

In addition to Italy and France, the countries of Spain, Portugal, Belgium, Slovakia, Slovenia and Finland made it onto the commission’s sin-bin list for bloated budgets.

Spending plans for 2020 are still underway in these nations after closely run elections.

The EU’s executive arm said Wednesday that eight countries were at risk of significantly falling short of the bloc’s aim for a deficit below 3% of GDP and debt approaching 60%.

Often flouted, the EU rules on public debt and deficits are the cornerstone of eurozone membership: Countries using the single currency are asked to limit deficit spending to 3% of GDP and overall debt to 60%.

Of particular concern for Brussels was Italy’s mountain of debt that is expected to balloon to a huge 136.8% of GDP, the highest in the eurozone except for bailed out Greece. 

France’s debt is expected to hit 98.9% of GDP at the end of 2020.

France, Italy, Belgium and Spain “have not sufficiently used favorable economic times to put their public finances in order,” said commission vice president Valdis Dombrovskis.

“In 2020, they plan either no meaningful fiscal adjustment or even a fiscal expansion,” he added.

In order to fight ballooning debt, national governments are under orders from the commission to reduce long-term costs such as public pensions or to make it easier to legally hire and fire workers.

Rome and Paris are in disagreement with the EU on the ambition of pledged reforms, and will have to negotiate with Brussels over the coming months in order to avoid potential penalties next year.

A year ago, for the first time, the European Commission rejected a national budget when it turned down Italy’s 2019 spending plans that were submitted by the populist far-right coalition.

After loudly refusing to cave to Europe’s demand, Rome later acquiesced and accepted the tighter spending and debt reduction demanded by Brussels.

That government, dominated by far-right leader Matteo Salvini, later collapsed under the pressure of preparing the latest budget and was replaced by a coalition of the anti-establishment Five Star Movement and center-left Democratic Party.

“We cannot compare the budget debate we are having this year…  a serious one… with the confrontation we had a year ago,” EU economics affairs commissioner Pierre Moscovici said earlier this month.

The commissioner on Wednesday lauded surplus-running Germany and the Netherlands for taking the “first steps towards a more expansive fiscal policy”. 

Both countries have been under pressure to boost spending to stimulate growth across Europe, which has been underperforming, especially in manufacturing.

“This is excellent news for the growth of these countries, of course, but also for the eurozone as a whole,” Moscovici said.

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© Agence France-Presse
The Associated Press contributed to this report

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