He blows on the Italian government of Giuseppe Conte like a slight wind of panic. The Economic and Technical Committee of the Eurogroup confirmed that the Italian accounts had slipped in 2018 and would deteriorate again in 2019 and 2020 if no correction was made. This is another step towards triggering the excessive deficit procedure that was reached before the meeting of the European Finance Ministers on 9 July.
The cacophony, meanwhile, continues to reign in the Italian executive. Giovanni Tria, the finance minister transalpine, promises a "kitty" that would correct the planned trajectory, but it will really be calculated at the end of July, after the Eurogroup. Prime Minister Giuseppe Conte, caught between the League and the 5-star Movement, is trying to calm the game between Matteo Salvini and Luigi Di Maio and asks to have "carte blanche" to negotiate with the Commission.
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Salvini calls for Europe to "respect" Italy
At first, Salvini, after a meeting with the governing bodies of the League, had dropped a bit, assuring that Italy would respect the rules, all the rules. But Lombard's wisdom only lasted a few days, and by Wednesday, June 12, he was riding his great horses again, stating in a video on Facebook: "We ask Europe to respect an Italy that wants to regain growth, build and invest. The cuts, taxes, austerity and precariousness have impoverished the country and caused the debt explosion. We want to free up resources, money, energy and work. "
The problem is that the first measures of the Conte government did not go at all in this direction. While the Italian debt was already the second largest in Europe (around 130%), the government has degraded public finances by putting in place a citizen's income and revised the pension reform by facilitating early retirement. years (for those who have contributed thirty-eight years). In 2018, Italy's structural effort was to be – 0.1% of GDP, where Rome spent about 6 billion euros too much, creating a structural deficit of 0.3% of GDP. This deficit will increase to 0.6% in 2019 instead of a structural surplus of 0.2%.
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The risk of early elections in Italy
The nominal deficit, it will move to 3.5% of GDP in 2020, according to the calculations of the Commission. This is a point that the Tria government is challenging, asserting that it will be less than 3% since it will be voted a VAT increase. But the Commission refuses to take this promise into account, because, every year, Italy votes this rise in VAT and then cancels it … "We do not believe anymore", we are blown to Brussels.
The Italian draft budget will be sent to the Commission in the autumn. But who will receive it? Is it up to the Commission of Jean-Claude Juncker to deal with the Italian case or will it be up to the next Commission which, in principle, will take office on 1 November? The new President of the Commission should be elected in July if deadlines are met. In this interval, the Union will therefore have a two-headed executive between Juncker ending and his successor already known. The Italian situation itself seems unstable: the chaotic cohabitation between Salvini and Di Maio will provoke early elections that would, in the current context, surely won by the leader of the League …
Who will do the dirty work in Brussels?
The question will therefore be whether the finishing Commission will complete the work and make heavy recommendations to the Italian populist power or if the new Commission is expected. The question is obviously political. What will be the political color of the new President of the Commission? Will he be a hard-line president of the EPP (European People's Party, Christian Democrat), who advocates a rigorous application of the German budget rules? Or will it be more of a centrist who will have no desire to start his mandate by attacking populist Italy?
If the procedure is initiated, it will be long and will span the entire mandate of the next Commission. The first step will be to stabilize the debt and then reverse the trend to a 5% drop a year. Only at this downward pace will Italy come out of the excessive deficit procedure. To reduce the debt, Italy must resume the path of growth. The problem is here. Italy considers that public spending and lower taxes will generate the growth that Italy misses so much. While in Europe the philosophy of the liberal and Christian-democratic governments is the exact opposite: it is because the burden of the Italian debt will fall that Italy will find margins to invest and generate growth. .