The Italian authorities will have to answer, on Monday 22 October, three main questions raised by the European Commission concerning the Italian draft budget for 2019.
"The structural deficit, the level of debt and the ability to sustain growth. These are the three points on which the exchange should focus" with Rome, said Economic and Financial Affairs Commissioner Pierre Moscovici on Friday 19 May in the Italian capital. "You have to invest to grow and grow to reduce debt," he added.
The day before, the Commissioner had handed a letter to the Italian Finance Minister, Giovanni Tria, requesting more information before deciding on the Italian draft budget (see EUROPE 12120).
The European institution notes a projected deterioration in the structural deficit (excluding economic conditions) of 0.8% of GDP, while an improvement of 0.6% is required for euro area countries with a nominal government deficit of less than 3% of GDP (see EUROPE 12111).
In addition to this deviation, there is a fiscal expansion close to 1% of GDP to finance the creation of a basic income and tax cuts, while the Council advocates a reduction in public spending.
The Commission is also concerned about the risk of non-compliance with the debt reduction criterion by Italy, whose public debt is close to 130% of GDP. It considers it necessary to see whether this criterion is still met.
Hence the risk of a deviation that is "unprecedented in the history of the Stability Pact" pointed out by the European institution.
Asked about the risk that the rise in interest rates on Italian debt could have a contagion effect on other euro area countries, Mr Moscovici did not wish to comment on the renewed tension on sovereign debt markets.
The Commissioner's objective is to engage in a constructive dialogue with the Italian authorities, without interfering in the country's internal affairs, in order to ultimately reach an agreement that reassures economic operators.
Calling for Italy's "responsibility", Mr Moscovici admitted that the governance of the euro zone, our, "common heritage", could be strengthened. "Leaving the euro zone would be against Italy's interests," he stressed.
See the Commission's letter to Italy: http://bit.ly/2ynkCdJ. (Original version in French by Mathieu Bion)