How dangerous is Italy's new budget?
Italy's coalition government wants to raise the public debt to 2.4 percent of the GDP in 2019 to finance the expansion of the welfare state. The money would be used to fund basic security benefits for the poor and an early retirement scheme. It said the deficit for 2020 and 2021 would be reduced. Rome is challenging the EU, which only stands to lose in this dispute over Italy's debt policy, commentators conclude.
Lose-lose situation for EU
The EU is powerless against the populism of the Italian government, Newsweek Polska believes:
“We've long known what the Italian economy's biggest problems are: an inflexible labour market, overregulation, excessive business taxes. By increasing spending the extremely ineffective state won't be able to avoid the necessary reforms or put an end to Italy's stagnation. This will not be the last battle between Brussels and Rome over the budget. ... And if the EU Commission hits back, Italy's populists will say they're the victims of the Brussels bureaucracy - until now a successful tactic. ... But even if the Commission does nothing, Rome will emerge victorious.”
Budget plan is part of a strategy
The Italian government is pursuing a perfidious plan with its draft budget, Jutarnji list suspects:
“Italy has overstepped the allowed limit in order to finance the costs of the ruling parties' election promises. ... Both deputy prime ministers, Matteo Salvini and Luigi Di Maio, have announced that they will stick to their course no matter what Europe says or does. ... A period of strife will ensue during which Italy's government will try to hide the fact that the planned budget simply isn't viable because even the increased deficit won't be enough to finance it. Then they'll blame the bureaucrats and 'drinkers' in Brussels for the unfulfilled promises with the goal of scoring as many points as possible for sovereigntist votes in the EU elections.”
Citizens' wage will be used as for surveillance
Deputy Prime Minister Di Maio said on Wednesday that the "citizens' wage" (reddito di cittadinanza) would be paid out via an electronic card, and that only morally defensible expenditures would be authorised. La Stampa takes a critical look at the statement:
“One might exaggerate and say that the government must give its consent for a poor man to spend his citizens' wage on a glass of wine. ... The complexity of the apparatus intended to check the right to a basic income of millions of people and control their spending habits does not bode well for individual freedoms. Quite apart from the fact that such a mechanism can't be put in place from one day to the next. It will take months before its effects are visible, and far longer until it is fully operational.”
Rome wants to provoke exit from euro
With the Italian government's debt crisis the likelihood of Italy exiting the euro has increased, writes the Neue Zürcher Zeitung:
“Italy is already low down in the investment class in regard to its grades as a debtor. Further downgrades could cause more turbulence on the financial markets. An observer of the German asset manager Feri already suspects that the government's real goal could be to deliberately escalate the euro crisis so it can then sell an exit from the euro as 'without alternative' - thus achieving the ultimate goal of the populists from the League and Five Star. At any rate Italy, as a major euro country, now poses a considerable risk of contagion, above all for other countries in the south of the European monetary union.”
Reaction of the markets speaks volumes
Italy's draft budget is a lesson in how not to manage a budget, Le Figaro writes:
“Demagogy and economics rarely go well together. After its first budget decisions, it didn't take long to see how little credibility the Lega-Cinque Stelle coalition had. Interest rates exploded, there was chaos on the financial markets, and banks plunged. The distrust of the financial markets - and consequently also of creditors - regarding Rome is absolute. ... Italy's misadventure is a useful reminder of what a lax budget policy and increasing the debt at all costs leads to: a dangerous loss of economic independence that only benefits the markets.”
The president is the last hope
President Sergio Mattarella could still reject the draft budget but that could also backfire, La Stampa explains:
“The president not signing the budget law would trigger an unprecedented power struggle. The problem is that any formal objection will only strengthen the narrative the deputy prime minister holds so dear: that they are the people's heroes and the opponents of the establishment. However, the public finances will only be safe when the consensus in favour of crazy expenditures is confronted with a different consensus. ... Here the president of the republic has an advantage. ... He is the most respected politician in the country. For people to become aware of the problems and dangers of complex things like budget policy someone has to explain these things to them. Someone they trust.”
Why the EU is going easy on Italy
The EU Commission is being far more lenient with Italy than with other EU countries, Rzeczpospolita complains:
“Brussels has displayed a very different approach vis-à-vis the new government in Rome than it has with Hungary or Poland. It has acted as if the plans of the new government didn't contradict the EU's official migration policy or pose a serious threat to the stability of the Eurozone. Diplomatic sources in Brussels have an explanation for this: Italy can exert more pressure on the EU than Warsaw or Budapest. Because if the Italian government keeps its election pledges - which could lead to the state going bankrupt - even Germany wouldn't be able to save it. That could spell the end of the EU.”