ADVERTISEMENT

EU Says It Doesn’t Favor Sanctions, Italy Needs More Measures

EU Says It Doesn’t Favor Sanctions, Italy Needs More Measures

(Bloomberg) --

The European Commission will seek explanations from Italy about its finances ahead of a key report due next week, while the bloc’s economics chief reiterated that he doesn’t favor sanctions against the Mediterranean nation.

“I am going to exchange views with the Italian government on additional measures that might be required in order for them to be compliant with the rules,’’ European Union Commissioner for Economic and Financial Affairs Pierre Moscovici said at a conference near Lisbon on Tuesday. “I’m not favoring sanctions,’’ he said, adding that sanctions do exist as part of the procedure in case rules are not respected.

Italian bonds pared some of their losses after Moscovici’s comment that he doesn’t favor sanctions, only to resume their slide, with yields on 10-year notes up 4 basis points to 2.71%.

The European Commission is considering proposing a disciplinary procedure for Italy next week over its failure to rein in debt, which could pave the way for a 3.5 billion-euro ($3.9 billion) penalty, according to an official familiar with the matter. The step could come as part of the EU’s regular budget monitoring reports, most likely on June 5, and would mark an escalation of Rome’s budget tussle with Brussels that roiled markets at the end of 2018.

Italian strongman Matteo Salvini has repeatedly ruled out additional measures to rein in Italy’s debt and deficit, including increases in sales tax. “Do you think that in a historic moment with youth unemployment at 50% in some Italian regions, when we have to rush to hire doctors and nurses because otherwise the hospitals will be empty, someone in Brussels should -- in the name of rules of the past -- ask us” to pay a fine, Salvini said on RTL radio.

Italy to Cite More Revenue, Spending Cuts in EU Reply: Corriere

Ahead of the report’s release, the EU executive is going to send a letter to the Italian Finance ministry asking Rome to communicate any relevant factors that should be taken into consideration into the assessment. The letter probably will be sent on Wednesday, an EU official said.

“One thing must be clear: If a country at one moment is totally out of the rules, not compatible with the rules, then sanctions exist,” Moscovici said. “They are mostly dissuasive, but at one moment they can also be persuasive. Let’s try to avoid this moment.’’

--With assistance from Lorenzo Totaro, John Follain and Viktoria Dendrinou.

To contact the reporters on this story: Nikos Chrysoloras in Brussels at nchrysoloras@bloomberg.net;Joao Lima in Lisbon at jlima1@bloomberg.net

To contact the editors responsible for this story: Chad Thomas at cthomas16@bloomberg.net, Richard Bravo, Jerrold Colten

©2019 Bloomberg L.P.