The European Commission is currently examining closely the Italian draft budget for 2019, which the Conte government amended by a margin and forwarded to it on Tuesday 13 November, in accordance with the deadline set.
On Wednesday 21 November, the European institution will deliver its final opinion on this project which, while maintaining the same macroeconomic data, should not, this time again, comply with the rules imposed on euro area countries whose public deficit is less than 3% of GDP and included in the preventive arm of the Stability and Growth Pact.
On the basis of comments from the Italian authorities, it could also give its opinion (Article 126.3 TFEU report) on the trajectory of Italian public debt, the excessive level of which (above 130% of GDP) had hitherto been tolerated because Italian budgets generally complied with European budgetary rules.
This escalation in the confrontation between Italy and the European level was hardly in doubt, as the latest statements by the main members of the Italian government were relevant factors (see EUROPE 12135).
At the end of October, the Commission had rejected the Italian draft budget (see EUROPE 12123) for the first time. The latter forecast a widening of the structural deficit (excluding the impact of the economic cycle) by 0.8% or even 1.2% of GDP next year, while the Italian structural deficit is expected to decline by 0.6% of GDP (see EUROPE 12133). In its revised draft budget sent on Tuesday, Rome did not therefore reverse its initial budgetary stance.
In a letter attached to the revised draft budget, Giovanni Tria, the Italian Minister of the Economy, maintains that the nominal deficit is expected to reach 2.4% of GDP next year, while specifying that the level of this rate would be "an impassable limit".
Mr Tria reported "important innovations" to the Commission. In particular, Italy is committed to increasing public goods sales by 1% of GDP - nearly €18 billion - in 2019. It calls for the application of flexibility clauses in the Pact in response to recent events such as the fall of a motorway bridge in Genoa (see EUROPE 12077) and the severe weather conditions affecting the peninsula, which are expected to cost nearly 0.2% of GDP over the next three years.
On Wednesday, the Commission refused to accept any speculation about the future of the procedure. We are in the process of "examining the response of the Italian authorities and the revised draft budget", said one of his spokespersons, Christian Spahr.
On the debt issue, the Commission services are studying the "relevant factors" presented by Rome that may explain the current and future trajectory of Italian public debt. It is rather unlikely that the Article 126.3 report will be published before the presentation of the European Commission's final opinions on all draft budgets for 2019, on 21 November, two days after the holding of an extraordinary Eurogroup.
The Commission may find in this possible report that the factors put forward are not relevant. This document would then be examined by the Economic and Financial Committee of the Council. Only after this step could the Commission recommend to Member States to open an excessive deficit procedure for public debt, a step that is still unprecedented at EU level.
In the European Parliament, the ALDE group has asked for a debate on the Italian draft budget to be included on the agenda of a plenary session. (Original version in French by Lucas Tripoteau)