No decision on Italy budget today - English

Cornelia Mascio
Novembre 8, 2018

Exasperated eurozone finance ministers are expected to back Brussels in the row over Italy's budget on Monday, setting the stage for market turmoil not seen since the debt crisis.

"Italy's behavior puts our plans at risk", Slovak Finance Minister Peter Kazimir tweeted.

"It would be inevitable", a senior European official told AFP. "Above all, the European Commission is extending a hand to Italy and I would like Italy to grasp that hand".

The finance ministers agreed with the EU Commission's assessment of Italy's budgetary plans and called on the government to "cooperate closely with the commission in the preparation of a revised budgetary plan that is in line with the Stability and Growth Pact", according to a person familiar with the Eurogroup discussions in Brussels on Monday. Finance Ministers from the 19 nations using the euro currency gather in Brussels on Monday to debate draft budget plans amid tensions over whether Italy's planned spending package breaks promises to cut public debt.

The situation is reminiscent of the Greek debt crisis, except with Italy's much bigger and more central eurozone economy at the heart of the storm, the size of the bailout would be so large as to make it virtually impossible.

Italy has until November 13 to send in a revised draft 2019 budget to Brussels, but Italy's ruling coalition leaders repeatedly excluded any possibility of any changes to the budget, saying higher borrowing was needed to kick-start growth.

Mr Stehn's analysis comes after Commissioner Moscovici reiterated Rome must understand European Union fiscal rules can not be broken with the bumper spending plan.

"When a member does not respect the rules it has an impact on the others", Moscovici said.

The vice-Prime minister Matteo Salvini, the boss of the League, responded by calling on its supporters to protest on December 8 in Rome, to say "peacefully" to the "gentlemen of Brussels: let us work, live, and breathe". We're not in a negotiation. "The rules are the rules".

Many officials say that, should Rome's borrowing costs on the market - already elevated on concern over the 2019 budget - rise to unsustainable levels, there would be no political will in the euro zone now to bail the country out.

Italy's deputy prime minister told the Financial Times in an interview published Sunday that he believes Rome's controversial spending plans will become "a recipe" for reviving European growth and that the continent is ready to abandon austerity and embrace the deficit-busting approach of USA president Donald Trump.

The Goldman Sachs economist suggested market pressure will play a "key role" on whether the Italian Government carries out its plans despite having signalled no intention to give up the proposed budget.

"On Nov. 19 we'll hold an extraordinary Eurogroup here in Brussels and this meeting will be mostly dedicated to euro-area reform", Eurogroup President Mario Centeno tells reporters after the meeting. "I really hope that the Italian government will seize the hand offered,"said French Finance Minister Bruno Le Maire".

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