More Global Risks As the Battle Between Italy and the EU Begins Again – Forex News by FX Leaders

Towards the end of last year, we saw quite a commotion between the EU and Italy. Italy’s debt is pretty high at 130% of the county’s GDP and they were aiming for the deficit this year to be around 2.4% of the GDP, but after the clash with the EU they pulled it lower to around 2%. But that was just on paper, because the reality is harsher. The economic weakness continues and now the Italian government wants to increase the deficit above 3% which is the ceiling by EU rules, which was broken on France’s case. The European Commission has started the disciplinary procedure on Italy today. Below are the comments from the EU:

European Commission Document

  • Italy’s growing debt justifies the launch of a disciplinary procedure
  • Warns about Italian debt increasing due to ‘snowball effect’
  • Says Italy is backtracking from structural overhauls, pension reform
  • Also says Greece fiscal measures are a cause of concern

EU’s Dombrovskis

  • Italy hasn’t complied with debt criterion
  • Excessive debt procedure (EDP) is warranted for Italy
  • Recent Italian measures have damaged public finances
  • Recent policy choices have been damaging for the Italian economy
  • Says that Italy’s growth has come almost to a halt

 

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