ROM – In what is becoming a dangerous chicken shoot for the global economy, the Italic population refused to launch Tuesday after the European Union sent for the first time a Member State budget proposal for violating its tax laws and posing unacceptable risks .
The European Commission, the group’s administrative bodies, had repeatedly called on Italy to reduce the deficit in the draft budget for 2019 to avoid large fines at the beginning of next year. But Italy’s populist government, which has fought against Europe’s tightening measures, continued and presented a budget with a proposed deficit equivalent to 2.4 percent of gross domestic product. That figure was considered to be too high for a country whose total government debt corresponds to 1
31 percent of GDP, more than twice the euro area.
As expected, the Commission rejected the plan and said it included irresponsible deficit levels that would “choke” Italy, the third largest euro area economy. Investors fear that the collapse of the Italian economy under its huge debt could lower the entire euro area and accelerate a global economic crisis invisible since 2008, or worse.
But Italy’s populists are not afraid. They have repeatedly compared their budget, fat unemployment, retirement and other benefits, to the New Deal actions by Franklin D. Roosevelt who helped America get out of the great depression.
“The only thing we have to fear is save yourself,” said Luigi Di Maio, Deputy Prime Minister of Italy and leader of anti-establishment Five Star Movement to reporters as it became clear that the European Commission should reject the plan.
Following the official rejection, Di Maio wrote on Facebook, “We know we’re on the right track, and therefore we will not stop.”
His coalition partner and vice-deputy prime minister, Matteo Salvini, leader of the right-right league party, was equally shattering. “This does not change anything. Let the speculators be secured, we will not go back,” he told reporters during a trip to Romania. “They do not attack a government without a people. These are things that will anger Italians even more.”
Italy has three weeks to revise its budget according to the group’s rules, but the unrivaled response of the EU can only be an effort to a struggle that Di Maio and his coalition partner have become itchy for.
Both the five-star and the league went to the election this year in direct opposition to Brussels. With the elections to the European Parliament on the horizon in May, it does not hurt their cause of re-launching a ghost of a bureaucratic boogeyman to prevent them from stimulating the Italian economy and delivering their campaign promises.
All of these give strong political arguments that argue with angry Italian voters who have not recovered from the recent debt crisis. Still, the markets are less touched by the chat rooms.
Mr. Salvini and Mr Di Maio have sometimes talked with disgust or distortion about the return between Italian and German 10-year benchmark bonds as if it were just another political enemy to be demonized or mocked. (“Spread,” Mr. Salvini has a joke, that’s what he puts on his breakfast bread.)
But the spread is no joke. It has become known as it may be among Italy’s populist politicians, and it may have become the most powerful assessment of health for the euro area economies.
In 2011, European plagiarism crises were wasted by governments governments – former Prime Minister Silvio Berlusconi, forced to resign due to lack of confidence from the international markets.
Giuseppe Conte, Italy’s prime minister, has suggested that Brussels leaders have tried to save the question of Italian economy to nail the spread and force its government to resort to European rules. Mr. Di Maio has said “the enemies of the people” worked to increase the spread.
The question for Italy and the whole of Europe is how far Italy’s government is willing to go. Will it be forced to submit the seriousness of economic reality? Or will Italian leaders convince their constituents that the country’s economic health is worth risking blasting a political and economic establishment that they say is abolishing Italians from their sovereignty?
And Brussels must decide how strictly it will be. Far to let a member list slip for fear of loosening ties that tie the union, its leader must ask if it’s worse than an open revolt.
“Prevention rules may seem tempting at first glance” Valdis Dombrovskis, European Commission Vice President in charge of the euro and financial stability.
“It can give an illusion to be free,” he added. “It’s tempting to try to cure the debt with more debt. But at some point the debt is too heavy, and at the end of the day you do not get any freedom at all.”
Mr.. Dombrovskis called Italy’s budget “deliberately committed to commitments” and said “the ball is now in Italy’s government”.
That ball has already made havoc in the Italian government.
At the end of September, Italy’s populists agreed on a budget delivered on both five-star priorities, seeking a broad unemployment benefit, and the league who wanted a fixed tax for small business owners. It also included more generous pension benefits, so that they could retire at 62 years if they had contributed for 38 years, as both parties were investing.
“In essence, with this action with this budget, we will have abolished poverty, said Mr. Di Maio over time.
Italy’s leaders have complained that they are unfairly appointed by the European Union, and Di Maio has threatened election if the block does not approve the deficit of 2.4 percent.
The former central-left government had proposed a budget with a deficit of 0.8 percent, which would have allowed Italy to continue tipping away with its overall debt.
Establishment forces within the government, including Minister of Economy Giovanni Tria, sought to shrink the proposed deficit level but were outmaneuvered by the populists. At one point, a member of the League of Tria’s microphone closed to prevent him from talking about the budget. 19659002] But the great pressure on Italy’s budget has come from outside Italy. Fitch Ratings issued a negative evaluation of the budget and Moody released his r ating for Italian bonds to a level over “junk” last week.
As the dispersions rose, Pierre Moscovici, European Commissioner for Economic and Tax Affairs, provoked the anger of the government when he said the Italians had chosen a xenophobic government.
Italy’s leaders have answered less than diplomatically. Following the President of the European Commission Jean-Claude Juncker, Italy’s situation compared with the Greek crisis, Mr.. Salvini portrayed him as a full and said that he was just talking to “humiliating people.”
Five-star top-ranking echoed the critics, called European leaders “slaves of alcohol” and Mr. Grillo wrote on his blog last week that he suspected Junker had neurological problems and featured a picture of him who did not know well.
Mr. Conte, Italy’s prime minister, tried to lower the temperature as investors fear of a confrontational pink.
On Monday, he assured journalists at the foreign press club that Italy’s budget deal with Brussels could be resolved through negotiations, with a nod to President George HW Bush’s famous “read my lips: no new taxes” promising in 1988 the Republican National Convention.
“Read my lips,” says Conte, switches to English by weight. “For Italy there is no chance, no way to get” Italexit. “There is no way to get out of Europe, in the euro area.”
Mr.. Bush agreed to raise the tax.