Mittwoch, 25.11.2020 20:04 Uhr

Italy and deficit/GDP ratio

Verantwortlicher Autor: Carlo Marino Rome, 27.07.2020, 14:58 Uhr
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Rome [ENA] After the last European summit deal, sealed after five days of acrimonious debate with 'frugal" northern Europeans, the Italian government seems strengthened. The Minister of Economy and Finance Roberto Gualtieri sharply denied the rumors attributed to him in the last few hours about his concerns on the so-called "cash", the reserve of money that allows him to pay wages, pensions and all other government expenses.

In a statement Gualtieri declared:” “The government intervenes with the broadest reaching economic measure in our history. €155 billion to support Italy in restarting after these difficult months: businesses, workers, families, Healthcare, Schools, Universities. Now, it’s about making every effort to deliver support and relaunch the country together”. Of course, the covid crisis is hitting hard, but the Italian accounts seem to be in order, the VAT revenue has held up and the government bonds continue to find buyers. At the moment there are also 209 billion Euros of the Recovery Fund coming from Europe. Until the regional elections in September , the Italian Premier will not raise the issue of using the ESM,

in order not to irritate the 5-Star movement, which is contrary to its utilization. After that Election Day, May be the 36 billion Euro of the ESM to help health sector are going to be utilized . The government has approved a fresh 25 billion euro 'budget deviation' aimed at helping fund the post-COVID recovery.  Various moves will be funded and these include the extension of the CIG redundancy fund to furlough workers; funding the school restart in September; rescheduling tax deadlines; and funding local bodies.

Despite the fresh deviation from parameters, the government reiterated a pledge to bring the deficit/GDP ratio back to the eurozone average.    Even before the COVID-19 cri­sis, the Sta­bil­ity and Growth Pact was administered more on the basis of prin­ci­ples than rules. In south­ern Europe - and also in France - the Pact and its amend­ments were in any case largely regarded as non­sense ("silly"). The EU Com­mis­sion had already put an amend­ment to the pact up for dis­cus­sion on 2nd Feb­ru­ary 2020.

In COVID19 times, the "need to repair” the severe eco­nomic slump makes com­pli­ance impos­si­ble for the time being, and its future seems uncer­tain. In March 2020, the Euro­pean Com­mis­sion acti­vated the gen­eral escape clause, a tem­po­rary sus­pen­sion of the Pact with the con­se­quence that the Mem­ber States can spend what they con­sider essential. On 1 July the European Fiscal Committee rec­om­mended the abo­li­tion of the debt ceil­ing of 60% of the gross domes­tic prod­uct. The Com­mit­tee is an inde­pen­dent advi­sory body to the EU Com­mis­sion. Its Chair­man, Niels Thys­gen, told that there was no point in set­ting an impractical tar­get.

The Euro­pean aver­age debt ratio is expected to rise to 102% by the end of 2020, far too much to ever fall to 60%. Accord­ing to Thys­gen, this would be too much to ask of the EU States. The Fis­cal Com­mit­tee would there­fore work on new tar­gets but this time they would be fitted to the indi­vid­ual cir­cum­stances of each Mem­ber State from the out­set. Premier Giuseppe Conte is likely to report to parliament on the deviation and Italy's budget goals next Tuesday. The deviation comes after Italy got the largest chunk, 209 billion euros, of a 750 billion euro EU Recovery Fund to help COVID-hit economies.  For the fist time ever, the EU agreed to jointly borrow money to fund an emergency.    

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