Italy moves towards an Excessive Deficit Procedure, but a change of attitude is in the air

21st November: the expected event

As widely expected, after the re-assessment of the 2019 Draft Budgetary Plan presented on 13 November by the Italian Government (where no significant changes were made on the economic projections front or on the deficit targets), the European Commission confirmed the existence of “particularly serious non-compliance” with the recommendations of the ECOFIN Council. Key to this assessment was the 1.4% of GDP gulf between the structural budget deterioration (0.8%) programmed by the Italian Government from the correction (-0.6%) recommended by the Council back in July 2018.

This large and unprecedented deliberate breach of the so-called “preventive arm” measures therefore calls for moving Italy into the “corrective arm” of the Stability and Growth Pact. Accordingly, the EU Commission took the first step towards open a debt-based excessive deficit procedure, a process that nonetheless remains relatively long.

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