Italy EU Budget Show Down

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Pondering
Italy EU Budget Show Down

I hope Italy succeeds where Greece failed. Perhaps they will have learned from them. What do you think. Will Italy hold its ground?

https://www.cbc.ca/news/thenational/national-today-newsletter-gerrymande...

"We won't subtract one single euro from the budget," Salvini told reporters during a visit to Bucharest. "I personally am available to go even tomorrow to meet the President of the European Commission to explain how Italy's economy will grow thanks to this maneuver. But no-one will take one euro from this budget."

The plan, tabled late last month, increases spending to meet a number of key campaign promises from the League and its left-ish coalition partner the Five Star movement. They include tax cuts, a basic income for the unemployed, and rolling back the retirement age.

If a new budget can't be agreed upon, the European Commission will open an excessive deficit procedure investigation, a disciplinary process that could eventually lead to sanctions or expulsion from the EU. Although levying such punishments against the bloc's third-largest economy might be self-defeating.

What seems more likely is that the markets will be used to try and bring the populists to heel. Italian bonds have already been falling for the better part of a week, and the government's borrowing costs will further increase if the European Central Bank stops or slows its interventions.

Some sort of face-saving agreement seems like the most likely outcome. After all, France is being permitted to run an even larger deficit in 2019, equal to 2.6 per cent of GDP.

The wildcard remains Salvini, who owes much of his popularity to his anti-EU stance and has more to gain by for an all-out conflict than compromise.

Offensive yet revealing appropriate terminalogy: bring the populists to heel

Pondering

They aren't even shy about it:

"From this perspective, our view is that market tensions would need to intensify in order to exert sufficient pressure on the Italian political system to trigger a change in the policy path and the political rhetoric around it.

"On that basis — and even if Italy does ultimately remain part of the Euro area — the market situation may need to get worse before it gets better," she added.

https://www.businessinsider.com/eu-rejects-italy-budget-in-unprecedented...

Sounds like an open plan to hurt Italy's economy to force them to heel. 

iyraste1313

Brace For Impact: Italy Poised To Launch Euro Parallel Currency

Wed, 06/05/2019 - 11:11

 

Authored by Mike Shedlock via MishTalk,

Italy faces an "Excessive Deficit" ruling, the first in EU history. Italy's response is to revive a parallel currency proposal.

WWWTT

Without doing more reading, I’m going to side with Italy. 

To me it appears there’s a clear north south divide in the EU. 

Portugal Spain Italy and Greece vs Germany France Netherlands Belgium. 

I’m sure there’s elements on both sides that go against the grain 

Ken Burch Ken Burch's picture

This explains the position of the Labour Leave faction:  If the EU won't tolerate even these tiny, utterly non-damaging increases in spending, no Labour government could carry out recognizably Labour policies at all.

voice of the damned

Ken Burch wrote:

This explains the position of the Labour Leave faction:  If the EU won't tolerate even these tiny, utterly non-damaging increases in spending, no Labour government could carry out recognizably Labour policies at all.

Does the EU's budgetary diktat apply outside the eurozone? My understanding is that it doesn't, but I'm really not sure. 

josh

Paragraph 4 of Treaty Protocol No 15, exempts UK from the obligation in Article 126(1+9+11) of the Treaty on the Functioning of the European Union to avoid excessive general government deficits, for as long as the state opts not to adopt the euro. Paragraph 5 of the same protocol however still provides that the "UK shall endeavour to avoid an excessive government deficit". On one hand, this means that the Commission and Council still approach the UK with EDP recommendations whenever excessive deficits are found,[379] but on the other hand, they legally can not launch any sanctions against the UK if they do not comply with the recommendations. 

https://en.wikipedia.org/wiki/Stability_and_Growth_Pact