“This is why it is an advantage for Italy”

Rome, 19 June 2024 – What may seem like a “failure”, with related economic disadvantages, could instead represent an advantage for Italy. That’s right. There procedure for excessive deficit opened from EU Commission towards Italy (and not only) it is a positive factor for the country.

The spending review commissioner Carlo Cottarelli (Ansa)

And this is supported by someone who knows a lot about public accounts: Carlo Cottarellieconomist who was, among others, director of the Fiscal Affairs department of the International Monetary Fund.

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The excessive deficit procedure “does not affect the performance of the markets and also in terms of adjustment for next year, paradoxically, produces a positive effect“. Says Carlo Cottarelli, director of theCatholic Observatory on Italian public accounts. The adjustment, he explains, “will be in the order of half a percentage point but with the current procedure there will not be theobligation to reduce the debt/GDP ratio. Which we wouldn’t have been able to do anyway due to the effect of building bonus fund. The debt in the next two years will rise, but it will be allowed for countries that have an excessive deficit infringement procedure in place.”

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There infringement procedure for excessive deficit is triggered if one of the EU member states does not respect one of the two parameters of the Stability Pactfrom 1 January 2024 back into force (albeit modified) after suspension during the Covid period:

  • The budget deficit exceeds 3% of GDP
  • The public debt exceeds 60% of GDP and does not decrease by 1/20 per year (on the average of the three previous years).
Forecasts on public debt

Forecasts on public debt

At this point the country is put under scrutiny and must produce a report to illustrate the situation and what it is doing to comply with the parameters: the so-called “Repayment plan”. At this point the EU Commission indicates some operations that must be carried out in the following months by the country under examination. If this does not happen, within the times and in the ways established and agreed between individual states and the EU, they can be triggered fines.

 
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