The Italian economy and public finances are at a crossroads

The Italian economy and public finances are at a crossroads, warns the European Commission in its usual autumn economic forecast. For this year, the Italian economy is expected to grow to 1.1 per cent of gross domestic product (GDP). It is one tenth percent less than the government estimated in Rome when the Commission presented its draft budget for next year. The Commission has rejected the Italian financial perspective for heavy debt and will have to submit a new proposal by 13 November.

According to the EC, Italian growth will support the recovery of exports and, to a certain extent, higher public spending in the coming years. The related rising deficit, higher interest rates and significant risks threaten to reduce the country's high indebtedness. Next year, the Italian economy will grow by 1.2 percent of GDP and by 1.3 percent by 2020, the EC said today. The Italian government itself hopes to grow by 1.5 percent of GDP in 2019.

The European Commission's view that Italian fiscal plans are in violation of EU fiscal rules were supported on Monday by the finance ministers in the euro area. They called on Rome to work with the European Commission on the budget review, today's figures give their arguments another importance. For next year, the Commission estimates the Italian budget deficit to 2.9 percent, against a government estimate of 2.4 percent. And this value is three times as much as the former Italian government would receive. The Italian government has so far refused to change its ideas, for example by introducing minimum wages and higher pensions.

Commissioner for Economic and Monetary Affairs, Taxation and Customs Pierre Moscovici recalled on Thursday that Commission estimates are based on data from Member States in October. "The situation can change in response to what the governments will send us next week in response to our comments, and we are still waiting for the revised financial plan," he said. He also refused to take pessimistic views on the Italian economy's prospects, and the effects on public spending would also have higher interest rates that the Italian government would have to borrow.