Dienstag, 13.11.2018 02:36 Uhr

Italy's 2019 budget plan

Verantwortlicher Autor: Carlo Marino Rome, 31.10.2018, 09:58 Uhr
Nachricht/Bericht: +++ Wirtschaft und Finanzen +++ Bericht 2532x gelesen

Rome [ENA] The Italian government 2019 budget plan seems to be conflicting with a debt reduction. The worst maybe is the Italian economy showed no growth quarter-on-quarter in the third quarter of 2018, following a 0.2 percent expansion in the previous period and below market expectations of a 0.1 percent growth. It was the first time that the gross domestic product stalled since the last quarter of 2014.

The European Commission stressed the fact the Italian budget for 2019 is incompatible with the reduction of debt that at over 130% of GDP is still a "crucial vulnerability". So, for the European Union the most urgent Italian economic problem, although not the most important, is the high public debt that represents 130% of GDP. The high debt remains a concern for the Eurozone. The creditors are above all Italians and the banks are saturated and are extremely sensitive to what happens with this debt. Only five months ago the interest rate on the Italian ten-year debt was 2% and now it is 3.5% (the German one is still 0.5%).

The government hopes to use its budget to boost the Italian economy but such a high public debt could limit the government's room to manoeuvre for more productive spending to benefit its citizens. On one hand, a debt-financed household expansion has the effect that government spending and household disposable income increase through higher social spending or lower taxes, and on the other hand interest rates tend to rise.

The economy ministry said earlier it had received a new letter from the European Commission asking for a report on the so-called 'significant factors' that may justify a debt/GDP ratio with a less marked reduction than that requested. It said "the reply must be sent by November 13". A similar letter was sent in past years, and the reply will be sent to Brussels respecting the deadline indicated, the ministry reported. The government will be to blame if growth does not speed up after a flat third quarter, Confindustria employers' group chief Vincenzo Boccia had declared last Tuesday.

According to Boccia there is a discrepancy of economic explanations in this government which Confindustria should start clarifying and if the results of growth don't come in the next few months it is the exclusive fault of this government and the economic policy it is endorsing, not of others. "We are at the disposal of the country and the government to make proposals which do not put ideologies before economic explanations." Confindustria chief declared.

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