European Commission: Italy Not Complying with Spending Rules

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Italian flagAccording to the European Commission data, Italy is not complying with the European Union spending rules.

The European Commission reported that Italy's debt was about 132% of its GDP in 2018, which is against the European Union's 60% limit. The commission also warned that the situation may worsen in 2019 and 2020 and recommended that the EU take legal action.

Italy benefited from bailout packages offered by the International Monetary Fund and the European Central (ECB) bank in order to avoid a default on its debt that would have affected the Euro. As a condition to get the loans, the IMF and the ECB required austerity measures from the borrowers.

Italy is one of the biggest economies in the eurozone and has the second highest debt burden in the whole European Union. Simply put, if a debt default were to happen, it would threaten the stability of the Euro.

Italy Dismisses ECB Warnings

Anticipating the European Commission move, Italy's populist government defied the warnings and dismissed the problems and called into question the Commission’s policy’ choices. It's not the first time the Italian government has questioned the Commission’s policies and rules; in the past, Italian lawmakers have gone so far as to label EC budget laws “obsolete.”

"I'm sure that in Brussels they will respect our will," said Italian representative Matteo Salvini, "the only way to cut the debt created in the past is to cut taxes."

Salvini, who is the vice prime minister of Italy, commented that austerity measures "have only produced more debt poverty, precariousness, and unemployment", and that Italy should take the opposite path to solve its compounding fiscal problems.

Italy also complained that the Commission is singling them out despite the fact that other countries (like Cyprus or France) have the same fiscal problems.

Sara Patterson has a Master’s Degree in political science and enjoys analyzing both current events and the international markets to get a fuller perspective of the currency market. Before turning to financial writing, she taught English writing skills to high-school age students. Sara’s work has been published on various financial and Forex blogs.