Italy threatens to veto EU budget
A row has broken out between Rome and Brussels over Italy’s budget. Rome wants to run up more debts than originally planned, listing as its reasons all the refugees it has taken in and the August earthquake. Prime Minister Matteo Renzi has reacted to criticism from Brussels by threatening to block the 2017 EU budget. Is Renzi's position justified?
Austerity would destroy recovery
Italy still needs an expansive fiscal policy, writes The Financial Times in defence of Italy's Prime Minister Matteo Renzi:
“The position of the commission must elicit some sympathy. It is administering the latest iteration of a set of fiscal rules that have been flouted since they were invented. It can hardly be surprised by Italy’s defiance: it has seen it before in country after country, including, in the early years of the euro, Germany. Letting another government off the hook, though, is the right call on this occasion. Italy, which was flirting with a full-blown debt crisis just a few years ago, looks to be in healthier shape, and supportive fiscal policy has played its part in that. Mr Renzi is right. A premature attempt to squeeze the deficit now would be counterproductive.”
No special treatment for Rome
Rome should stop demanding special treatment, Il Sole 24 Ore warns:
“Europe cannot afford to ignore the structural problems and growing divergences that are manifesting in the Eurozone despite the ECB's expansive monetary policy. Flexibility cannot become a long-term policy - not for ideological reasons but because it is important to avoid intensifying the mutual distrust and inequalities within the euro club. Flexibility must remain a short-term instrument only used in special cases. Particularly bearing in mind that two Christian democratic politicians in peripheral countries, in the north the Irish leader Enda Kenny and in the south theSpaniard Mariano Rajoy, have remained in power despite imposing austerity measures on their countries - and in defiance of all the populism. And even more so when we consider that Greece and Portugal, two countries with far-left governments, are stringently adhering to the course of budget consolidation.”
Italy is Europe's biggest problem child
A further downturn in Italy's economy could plunge Europe into a new crisis, warns The Irish Independent:
“The Italian economy hardly grew at all in the decade before the 2008 crash; its crisis in the years afterwards was among the worst in Europe; and its recovery remains barely existent. There is little sign that Italy's long underperformance is about to change. There are plenty more signs of worse to come. If a major constitutional referendum is rejected by Italian voters in early December, the political situation could further weaken the economy. With a slow-burning banking crisis and one of the highest public debts in the world, the outlook is grim. If Italy goes Greek - and it could very well do so - we are all in very big trouble.”