Brussels slams Italy’s budget, sends it back for rework

The ‘ball is in the court of Italy’s government.’

The European Commission on Tuesday gave Italy three weeks to rewrite it budget draft — or face further consequences.

In an unprecedented but expected decision on Tuesday, the College of Commissioners issued a “negative opinion” on Rome’s budgetary plans after Finance Minister Giovanni Tria’s letter on Monday failed to convince EU authorities that the draft text was compliant with eurozone rules.

At a press conference in Strasbourg after the decision was announced, Vice President Valdis Dombroviskis said: “It is tempting to cure debt with more debt … but this would not be fair for the younger generation … keeping sound fiscal policy and confidence is crucial.”

“This is about making sure Italian companies can raise funding and young Italian families that need a loan can get one at a cost they can afford.”

The “ball is in the court of Italy’s government,” Dombroviskis said, explaining that the Commission could decide to revise the timeline of its next “excessive deficit procedure” report and bring it forward from May 2019.

Commissioner Pierre Moscovici added that “this is an unprecedented situation, and the decision should not be surprising to anyone as the Italian government’s draft budget represents a clear and intentional deviation from the commitments made by Italy last July.”

But 5Stars leader and Deputy Prime Minister Luis Di Maio immediately posted on his Facebook page: “We won’t give up because if we do, technocrats who are pro-banks and pro-austerity would be back … It’s the first Italian budget the European Commission doesn’t like. It doesn’t surprise me because it’s the first budget that is written in Rome and not in Brussels.”

Earlier in the day, Prime Minister Giuseppe Conte also told Bloomberg TV that his government has no “Plan B.”

According to Teneo Intelligence analyst Wolfgang Piccoli, markets should brace for extended volatility. “Given how much it has politically invested in the budget and with the 2019 European elections looming, the government is likely to maintain a defiant attitude … over the next few months,” he said.