L'Italy he's in good company, but there's not much to smile about. Together with six other countries, the EU infringement procedure for excessive deficit. Now a process is underway which in the autumn will result in commitments for the forced return of the accounts. Once the planned steps have been taken, the European Commission will put on the table a series of recommendations to the Council on reducing the deficit in the autumn package of the European Semester. In addition to Italy, France, Belgium, Hungary, Malta, Poland and Slovakia are involved.
“The infringement procedure is not news, it was widely expected, we already said it a year ago. On the other hand, with the deficit boom induced by the exceptional measures we certainly couldn't think of staying below 3%”, the first comment from the Minister of Economy Giancarlo Giorgetti: “We have a path, started from the beginning of the government, of responsibility for sustainable public finance, which is appreciated by the markets and EU institutions: we will continue like this, so it is nothing surprising”.
According to the European Commission, Rome finds itself in a situation of imbalance, although its judgment has improved from the “excessive macroeconomic imbalance” of 2023. In Italy “vulnerabilities linked to high public debt and weak productivity growth remain in a context of fragility of the labor market and some residual weaknesses in the financial sector, which have cross-border relevance”, the analysis of Europe. The public debt-to-GDP ratio, “significantly decreased” since the peak of Covid, “is still high, at over 137% of GDP in 2023, and the downward trend is expected to reverse this year and next. This reversal is attributed to a large stock-flow adjustment that increases debt, still large, albeit decreasing, public deficits, as well as lower nominal GDP growth.” In its speech, the EU government stressed that the analysis of debt sustainability indicates high risks in the medium term. These are the data listed: “According to the basic ten-year projections, the public debt/GDP ratio increases steadily up to approximately 168% of GDP in 2034. The debt trajectory is sensitive to macroeconomic shocks. According to stochastic projections, which simulate a wide range of possible temporary shocks to macroeconomic variables, there is a high probability that the debt-to-GDP ratio will be higher in 2028 than in 2023”.
And again, emphasis was placed on need for reforms and investments to “overcome structural deficiencies and promote conditions favorable to productivity growth. Then on the Pnrr, it is essential to maintain the pace of implementation, but further political efforts would be necessary. In our country, the Commission continues, “further actions are clearly necessary to reduce the high public debt ratio. The reformed Stability and Growth Pact, including the application of the excessive deficit procedure, offers an adequate and strong surveillance mechanism to address risks to fiscal sustainability and to complement surveillance.”
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