The European Commission has reached an agreement with Italy on its budget plans, which the EU’s executive arm had warned could break the euro’s rules and lead to legal action.
European Commission Vice President Valdis Dombrovskis said that the “agreement is not ideal” but allows the Commission to avoid legal action against Italy — “provided that the measures are fully implemented”.
The Commission, which supervises the budgetary plans of EU countries to ensure they respect the euro rule book, said it had been reassured by new fiscal measures provided by the Italian government on Wednesday.
A lot of hard work and negotiation went into finding solution on the Italian budget. Let's face it: the solution on the table is not ideal. But it allows us to avoid an Excessive Deficit Procedure at this stage, provided that the agreed measures are fully implemented #EU #Italy
— Valdis Dombrovskis (@VDombrovskis) December 19, 2018
Mr Dombrovskis said “the Italian government has come a long way” from the heated rhetoric of a few weeks ago.
EU Economy Commissioner Pierre Moscovici added that the agreement “shows that the European Commission is not the enemy of the Italian people”.
Italy’s debt load is the second-highest in Europe after Greece at over 130% of GDP.
Many are concerned about new financial turmoil in Europe should Italy lose control of spending, but the government in Rome was insisting that a sharp increase in spending is needed to jump-start economic growth.
The Commission can launch sanctions when countries breach, or are in risk of breaching, the deficit threshold of 3% of GDP or when they violate the debt rule by having a government debt level above 60% of GDP.
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