Italy, spectre of EU excessive deficit procedure materialises

Brussels – Italy’s fate appears sealed. The excessive deficit procedure seems a sure thing for the country because the indications from Valdis Dombrovskis, European Commissioner for an Economy that Works for People, are explicit. “The benchmark is the 3 per cent threshold in relation to Gross Domestic Product, but there is the possibility, in cases of minimal and temporary deviations, to opt not to open it,” he says at the end of the Ecofin Council proceedings. This condition was not met by Italy, whose deficit-to-GDP ratio at the end of 2023 is 7.4 per cent.

The European Commission will present its spring economic forecast tomorrow (May 15), with all macroeconomic indicators, including those related to the deficit. This document will certainly be the basis for the assessments that, Dombrovskis stresses, “are underway” and will materialize in the decisions expected on June 19. The commissioner’s clarifications jar with those of fellow Economy Commissioner Paolo Gentiloni, who, on the possibility of measures against Italy, had remained vague. At the same time, Dombrovskis’s words do not premise nor promise anything good for the Meloni government, possibly forced to a strict imbalance recovery plan made up of reforms and spending cuts. That is what Italy expects. Economy Minister Giancarlo Giorgetti himself publicly acknowledged that he expects such a decision.

The excessive deficit procedure requires the country to provide a corrective action plan and corresponding policies, with specific deadlines for implementing the measures in the plan to correct imbalances. In case of delays or non-compliance, fines can be triggered, which, with the new stability pact as it was reformed, are smaller than in the past and, precisely for this reason, easier to impose.

Specifically, according to the new rules, in case of deviations or insufficient reduction commitments, penalties of 0.05 per cent of national GDP may be applied every six months, eventually equal to 0,1 per cent of GDP per year (instead of a non-interest-bearing deposit of up to 0.5 per cent of GDP, as provided so far).