The European Commission "tightens the loop" on the neck of Italy

04.06.2019

The reason for the persecution of Brussels in Rome - is a violation of budgetary discipline. Italy's national debt reached 132% last year. Worse only in Greece. According to the rules of the eurozone, national debt must remain below 60%.

Italian Interior Minister and the leader of the Liga party, Matteo Salvini, considers EU budgetary norms “obsolete.” His government is going to carry out large-scale tax cuts, which will increase the budget deficit to 2.4% (the EU demands to reduce it to 1.8%). That is why the European Commission is almost certain that the Italian Ministry of Finance will continue to break the rules in the current and next year.

What is the eurozone “budget discipline”?

The so-called fiscal discipline in the EU appeared under pressure from the former German Finance Minister Wolfgang Schäuble after the financial crisis in the 2010 eurozone. Then the European Central Bank (ECB) had to save Greece, Portugal, Cyprus and Spain, because they were not able to repay their debts. If the EU had not come to the aid of these countries, the euro could collapse, and the eurozone would plunge into recession.

In the framework of the rescue program "debtors" Greece received 289 billion euros from the ECB and the IMF. In exchange for assistance, crisis countries must reform and reduce government spending in order to reduce public debt. The program of financial assistance to Greece is already suspended. According to World Bank statistics, GDP growth there is 1.5%, but Athens still continues to pay 289 billion euros to creditors, and their national debt is at around 180%.

Euroskeptics for Keynes method

Small Greece is one thing, another is the third economy of the European Union. With such baggage of national debt, Italy represents a danger to the stability of the European economy. Italy was previously at risk along with France. The situation began to escalate in 2018, when after the parliamentary elections in Italy, the Euro-skeptics from the Five Stars and the League won. Both of them opposed financial discipline and promised to increase government spending and lower taxes.

The problem of the eurozone countries is that after the creation of the ECB they transferred to him two important functions that can help overcome the crisis. The Central Bank of Italy cannot independently raise or lower the key rate or regulate the amount of money supply, because these tasks are entrusted to the bank in Frankfurt am Main. Therefore, Rome has the opportunity to influence only through taxes and government spending.

Salvini offers “fiscal shock” through tax cuts. The method he preaches is correlated with the countercyclical regulation of J. M. Keynes, who believed that in times of crisis it was necessary to stimulate the economy with “cheap money”. Opponents of Salvini from Brussels require Italy to tighten their belts, otherwise the national debt will become so large that it will lead to a collapse.

The leader of the Italian right in a recent post on Facebook, made after the elections to the European Parliament, called on the EU to abandon the fiscal rules, which are “defeated by evidence, history and a popular vote.” For Salvini, the primary task now is jobs and GDP growth, not state debt, he noted. According to the estimates of the Minister of Economy, Giovanni Tria, who also complained about the slowdown of the economy, Italy will at best be able to return to the execution of government debt rules in 2020.

What will happen next?

Recommendations of the European Commission - the first stage of the coercion of Italy to discipline. The next step should be a meeting of finance ministers and heads of central banks of the eurozone countries (Ecofin). If within two weeks they support the initiative of the European Commission, the latter may officially call for the opening of disciplinary measures against Italy.

The final decision will be made by 28 finance ministers, meeting July 8–9 in Brussels. The first stage of the disciplinary process should be the requirement of Italy to immediately implement a program of tax cuts and payments to fit into the EU requirements.

Penalty

By the end of July, the European Commission will determine the amount of the fine. In the event of a "serious" violation, Italy will have to pay 0.2% of GDP - about 3.5 billion euros. If she refuses to cooperate, the size of the fine will increase to $ 7 billion. Plus Italy will be disconnected from the credit program of the European Investment Bank.

Punishment for the dislike of migrants

The recent elections to the European Parliament have strengthened the position of right-wing parties, which over the past two years have expanded their representation in the parliaments of Germany, Austria, Sweden, Hungary, and the Czech Republic. This trend threatens the plans of the globalist elite to transform the EU into a superstate. The Italian government has challenged this plan. Salvini criticizes the EU’s migration policy, sanctions against Russia and calls for the preservation of traditional family values. Recently, on his initiative in Italy, the terms “father” and “mother” were returned to the documentation.

"Friends of Soros" do not like it. Therefore, while Italy has not “infected” the rest of Europeans with traditional values, it is necessary to overthrow the disagreeable regime in Italy. They have already managed to do this trick in neighboring Austria. Will Rome stand?

The government of Prime Minister Antonio Conte has three ways out of the situation. The easiest way is to comply with the requirements of the European Commission and plunge the Italians into hunger, but this is a direct road to retirement. The second option is to drag out time and hope that in November the European Commission will be headed by a more loyal politician to Italy. And the third way is to hold a referendum and exit the eurozone. Inaction is worse than any of these three options.