Public accounts, EU opens infringement procedure for Italy for excessive deficit

European infringement procedures for excessive deficit have been opened for Italy and six other European countries: the communication arrived today. For the States involved, a process is now opening which in the autumn will translate into commitments for the forced return of the accounts: after the planned steps, in fact, the Commission will propose recommendations to the Council on the reduction of the deficit in the autumn package of the semester European.. The EU Commission, in particular, has opened an excessive deficit procedure for Italy, France, Belgium, Hungary, Malta, Poland and Slovakia. The community executive then assessed that Romania had not taken effective action to correct the deficit requested by the Council.

The infringement procedure

The path of the infringement procedure formally opened today, with the EU Commission’s report on compliance with the constraints for public deficit and debt, which are to be kept respectively within 3% and 60% of GDP. After the years of stoppage due to Covid, the Stability Pact is no longer suspended and indeed is being applied for the first time in the renegotiated formula in force since the end of April. The new ruler, among other things, has led to a revolution in the pace of reducing the excessive deficit, as well as introducing control of the accounts with multi-year spending trajectories.

The countries involved

According to Eurostat data, at the end of 2023 eleven countries – including ours – had a deficit above 3%. Italy was at the highest in the EU at 7.4%, with the Commission forecasting that it will fall to 4.4% in 2024 and rise again to 4.7% in 2025 (with unchanged policies). For three other countries the overshoot is contained (Czech Republic, Estonia and Spain), with two (Czech Republic and Spain) expected to be below 3% already in 2024. Among the “relevant conditions” to be considered and which have been revised with the Pact , there is among other things the increase in public spending on defense as a mitigating factor. Without forgetting that Italy obtained the separation of interest on the debt in the first three years.

The next steps

After today’s report from the Commission, the expectation is that its proposal on the Council’s recommendation for reducing the deficit will arrive in November. The new Pact, however, imposes a correction of at least 0.5% per year of the structural budget until it returns within the 3% threshold (it will therefore be primary in the first three years). Already next Friday, 21 June, the “reference trajectories” will be assigned to the States (they will not be made public), a new hub of the “preventive arm” of the Pact. Negotiations will then open between the States and the Commission and the countries will present the multi-annual spending plans on 20 September, which will then be approved in the autumn package of the European semester, together with the recommendations on the deficit. For Italy, the structural adjustment of 0.5-0.6% of GDP over 7 years, already included in the Def trends until 2027, would correspond to at least 10 billion per year.

The previous

Last year in the examination (theoretical, given the suspension of the Pact at that time) on the deficit procedures, the Commission concluded that the deficit criterion was not respected by 14 Member States, including Italy. While the debt criterion was not respected for France, Italy and Finland. In its considerations on Italy, the community executive had, among other things, judged that the expected growth in primary current expenditure financed at national level (a relevant criterion for the old Pact) was in line with the Council’s recommendation and underlined how the country was projected to preserve investments financed at national level. For the debt, among other things, there was talk of a trajectory “sensitive” to macroeconomic shocks. The report highlighted that Italy continued to present excessive imbalances, with vulnerabilities linked to high public debt and weak productivity growth, in a context of fragility of the labor market and that some weaknesses in financial markets persisted, which had cross-border relevance .

SUBSCRIBE TO THE SKY TG24 WHATSAPP CHANNEL