Italy’s budget: will Brussels accept?

Following the controversy over Italy’s budget for next year, Italian ministers are “extremely happy” with the final plans. All that is left now is to wait and see if European Commission chooses to accept it.

During a press conference yesterday evening, Deputy Prime Minister Matteo Salvini commented:

“I am extremely happy, we are keeping our promises, slowly but bravely. We are dismantling the previous pension law, giving back the right to work at 400,000 Italians (young people able to pick up the jobs vacated by older people who could retire earlier). We are not raising taxes of any kind for 2019.”

Italy’s budget was submitted ahead of the midnight deadline yesterday.

It includes controversial policies that had been promised by both sides of the coalition during the general election in March.

Plans include boosting welfare spending, cutting taxes and altering unpopular pension reforms of 2011. Additionally, Italy’s budget aims to raise the retirement age and set forth a new basic income.

“We are keeping all our promises, we are very happy with this budget,” Prime Minister Giuseppe Conte said.

“This is the outcome of a lot of work and a lot of meetings that we have transparently made public. We have worked on a project, more than on a budget, we have worked on a project that the country needs, that citizens need. And, best of all, we are keeping the accounts in order, and delivering on our promises at the same time.”

Since the end of September, we have seen tensions rising between Rome and Brussels. Ever since the coalition announced a budget deficit equaling 2.4% of Italian GDP, Brussels have been concerned. Despite the figure being under the EU’s limit of 3% of GDP, Italy’s debt stands second to Greece in Europe at 131% of national output. Indeed, whilst deputy Prime Minister Di Maio insists the budget will “abolish poverty”, it fails to meet the EU’s budget rules. Additionally, the increasing deficit is incredibly risky given Italy’s crippling amount of public debt.

Italy’s budget could have a tremendous impact on the Euro zone economy as it is the third-largest European economy.

In fact, since the EU backlash began, the euro has fallen and Italian shares and bonds have experienced a sharp sell-off. Moreover, at one point, Milan’s FTSE MIB was at its weakest level in 18 months at 2.4%.

Throughout the process, Salvini has criticised the European Commission:

“The Enemies of Europe are those sealed in the bunker of Brussels.”

But, after some attempts to compromise, Italy’s budget has now been submitted. All that is left now is for the European Commission to assess it and decide whether to accept or reject the plans.