Netherlands Blasts Italy Budget Truce, Doubts Numbers Add Up
(Bloomberg) -- Dutch Finance Minister Wopke Hoekstra lashed out at the European Commission’s truce with Italy over Rome’s spending plans, in comments highlighting continuing discomfort within the euro area about the Italian budget.
“It’s a missed opportunity to do the right thing for the long run,” Hoekstra said in an interview from Brussels on Monday. He made the comments after a meeting with his counterparts from the currency bloc in which he asked the commission to explain “in writing” how numbers add up in the compromise which was reached last month.
The European Union’s executive arm decided against launching a disciplinary procedure against Italy over its deficit and debt in December, after the country’s populist government pledged to rein in some of its spending. Italian assets rebounded on the deal, as the protracted standoff had previously triggered a sell off, damping economic activity and possibly tipping Europe’s most indebted state into recession.
Brussels and Rome met each other half way for the compromise to be reached, as Italian populists held off on their most ambitious plans, while the commission turned a blind eye to Italy’s failure to comply with the obligation to lower its structural deficit this year -- which excludes one-off expenditures and the effects of the economic cycle.
“In my mind this was unconvincing by the commission side,” Hoekstra said. “Important questions remain,” he added, asking the commission to apply the bloc’s rules “in full to everyone involved.”
EU rules require countries with high debt levels to reduce their loads each year. “The rules are not there because I like them or whoever likes them; the rules are there because they are in the long-term interest of the European people and European countries,” Hoekstra said.
The commission’s credibility in enforcing its fiscal rules has already been scrutinized in the past after the guardian of EU treaties opted against fining repeat-offenders Spain and Portugal and gave France more time to meet its targets on multiple occasions. In Monday’s meeting of EU finance ministers, however, the Dutch push to cast doubt over the Italian truce didn’t garner explicit support from other countries, wary of reigniting debt-crisis era tensions, according to people familiar with the matter.
Pierre Moscovici, the EU commissioner in charge of economic and financial affairs, said that while negotiations with Italy hadn’t been easy, not avoiding the crisis would have been “stupid for Italy as well as the euro zone.”
“We are of course still monitoring the situation very closely,” Moscovici told reporters after the meeting. “We’re going to look very closely to the stability program delivered in April by Italy because we still have concerns not only about 2019 but also 2020 and 2021.”
Moscovici on Tuesday morning said he would “provide any detail to whoever asks for it” on the compromise over Italy. “Another way of proceeding would have led us to a crisis between Italy and the euro zone, which would have been bad for Italy, bad for the euro zone,” he told reporters in Brussels.
In the meantime, Italy’s populist government is facing renewed criticism of its economic policies at home after the Bank of Italy signaled that the country may have slipped into a recession in 2018 and will have slower than forecast economic growth this year and next. A slowdown would make it difficult for Italy to keep its promise to the EU of containing the deficit.
©2019 Bloomberg L.P.