Euro Nations Ramp Up Pressure for Action on Italy's Budget

(Bloomberg) -- Austrian and Dutch finance ministers increased pressure on the European Union to call Italy’s populist government to account for its spending plans, two days ahead of the executive arm issuing its verdict.

“We expect a clear response from the commission this week,” Austrian Finance Minister Hartwig Loeger, whose country has been one of the most hawkish toward Rome, told reporters on his way into a Brussels meeting with his euro-area counterparts. “My concern remains because Italy hasn’t made any changes.”

Euro Nations Ramp Up Pressure for Action on Italy's Budget

The European Commission is expected to say Wednesday that Italy’s budget is in breach of EU fiscal rules when it issues its opinions on draft budgets in the currency area. Italy has so far refused to yield to demands from Brussels on its 2019 targets for a 2.4 percent budget deficit and 1.5 percent growth, because of excessive spending and overly optimistic growth estimates.

In Brussels, Dutch Finance Minister Wopke Hoekstra spoke for the concerns of his colleagues.

“We all are worried about the existing situation,” Hoekstra told reporters. “This is a matter that not only involves Italy but involves all of us because in the end we are a high-trust society and it’s imperative that the commission does what’s in the interest of all the different European countries.”

Italian Finance Minister Giovanni Tria attempted to calm things down by saying that the situation is not that bad.

“We are talking about deviations that are not so huge, so I say we need to bring the discussion back to reality,” Tria said during a press conference in Brussels. He said Italy inherited a 2 percent deficit from the previous government and therefore the discussion with the EU is over a 0.4 percent deviation. He also reiterated that the extra spending is needed to promote growth and avoid a recession.

Euro Nations Ramp Up Pressure for Action on Italy's Budget

Italian deputy premiers Luigi Di Maio of the anti-establishment Five Star Movement, and Matteo Salvini of the anti-migration League have both insisted their coalition will stick to reforms in the budget to deliver on at least part of their election promises on welfare benefits, tax cuts and a lower retirement age.

Di Maio put on a confident front on a visit to the Naples region Monday, saying of a possible commission procedure which could lead to fines: “It doesn’t worry me.”

Salvini struck a more combative tone on a trip to northern Milan, opening a new front with Brussels by threatening to oppose a Franco-German plan for a euro-area budget. “If it damages Italy, as it appears, obviously we won’t agree to it,” Salvini said.

©2018 Bloomberg L.P.

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