EU Commission takes step towards Excessive Deficit Procedure against Italy

The European Commission took the first step on Wednesday toward disciplining Italy over its expansionary 2019 budget after Rome refused to change it, raising the stakes in a dispute that has alarmed the whole euro zone and could eventually lead to fines.

The Commission said the Italian draft increased the 2019 structural deficit, which excludes one-offs and business cycle swings, by 1.0 percent of gross domestic product rather than cut it by 0.6 percent as required by EU laws.

Italy also would not trim its huge debt in a “a particularly serious case of non-compliance” with the rules, the Commission said, warranting the launch of an excessive deficit procedure.

Italy’s debt, at 131 percent of GDP, is proportionally the second highest in the euro zone after Greece’s. Under EU rules it should be falling every year towards 60 percent, but the Commission said it would be stable for the next two years.

“The opening of a debt-based excessive deficit procedure is thus warranted,” Commission Vice President Valdis Dombrovskis told a news conference. “In a situation of very high debt, Italy is essentially planning significant additional borrowing, instead of the necessary fiscal prudence.”