Euro zone finance ministers should logically support the European Commission's position on the Italian draft budget plan for 2019 at the Eurogroup on Monday 3 December (see other news).
After the rejection of a first draft budget plan, the Commission gave an unfavourable opinion on Wednesday 21 November on a minimum revised draft budget plan(see EUROPE 12142).
Rome forecasts an increase in the structural deficit (excluding the impact of the economic situation) of 0.8% of GDP (1.2% of GDP according to the Commission), while it is expected to fall by 0.6% of GDP under the rules of the preventive arm of the Stability and Growth Pact.
The Eurogroup should, barring surprises, approve this Commission opinion, in line with the statements made by its President, Mário Centeno, in early November, a few days after the rejection of the first Italian draft budget plan (see EUROPE 12130).
Although Finance Ministers are not supposed to express their views on this issue, the European Commission's report on the Italian debt (Article 126.3 TFEU), published at the same time as its second opinion on the Italian draft budget plan, should be on everyone's lips. This report, which concludes that the public debt criterion with regard to the treaties has not been met, paves the way for the opening of a debt-based excessive deficit procedure.
Excessive deficits. On Thursday 29 November, the Economic and Financial Committee of the Council of the European Union endorsed the Commission's position. This green light gives the Commission a mandate to recommend to the Council to open an excessive deficit procedure, a recommendation that should be made before Christmas. Ideally the Commission would like the Council to be able to decide to open such a procedure at the January Ecofin Council meeting.
But possible sanctions against Rome should only be imposed after the summer, if there are sanctions.
It will be a question of finding a balance between firmness in terms of compliance with the rules and a willingness to engage in dialogue with Rome, an approach that includes the Commission and several States. A long procedure could have the effect of keeping the spread (which expresses the difference between the German and Italian borrowing rates) at a high level and would therefore be costly for Italy.
Recent statements by the Italian executive suggest that Giuseppe Conte's government could review its copy (see EUROPE 12145). However, Italian officials only refer to the nominal deficit and the Commission expects commitments made at structural level.
The issue of the Italian budget for 2019 will also have been raised this weekend on the sidelines of the G20 summit in Argentina (see other news). (Original version in French by Lucas Tripoteau)