Italy still has "excessive"
economic imbalances, the European Commission said in its Country
Report on Italy Wednesday.
In particular, "the high (public) debt and protracted scant
productivity imply risks with a transnational significance, in a
context of high levels of NPLs and unemployment," the report
said.
"The debt will not fall in the next few years, given that
weak macro prospects and the current government budget plans,
albeit less expansive than before, imply a deterioration in the
primary surplus".
The Commission said that "the 2019 budget includes measures
that overturn elements of important reforms done previously, in
particular on pensions, and does not include effective measures
to boost the growth potential".
It said "despite some progress in mending banks' balance
sheets, reforms of bankruptcy law and active policies on the
labour market, the impetus of reforms has been amply stalled in
2018".
The Commission said that "higher rates with respect to the
levels of the start of 2018 are affecting banks' funding costs
and capital buffers, weighing on the supply of credit to the
economy and GDP growth".
It said "the stock of non-performing loans (NPLs) has
continued to fall significantly, but keeping up the pace of
reduction in NPLs will be challenging given the conditions of
the market".
Presenting the report, Vice President for the Euro Valdis
Dombrovskis said "we remain concerned that debt is not falling
because of the government's weak economic plans, and in general
the impetus of reforms has stopped".
He said "The Commission remains vigilant and will closely
monitor the Italian situation" to make a Spring assessment based
above all on "the level of ambition of the national reform
programme".
The Italian situation is "concerning" and the EC's message is
"well-known and strong: it must improve its public finances, the
efficiency of the public administration and the judicial system,
and reinforce the financial system," Economic Affairs
Commissioner Pierre Moscovici said.
He said "the urgency is still more felt given the weakening
of the Italian economy which, I remind you, is growing by 0.2%".
The Commission will see if the government's new basic income
for the poor and job seekers is "sustainable" for the public
finances, Employment Commissioner Marianne Thyssen said.
The EC will also gauge its impact on employment, given the
weakness of employment policies, she said.
The basic income is one of two flagship policies in the 2019
budget.
The other is the 'quota 100' pension reform.
Deputy Premier and Labour and Industry Minister Luigi Di Maio
on Wednesday contradicted the EC's concerns that the 2019 budget
is stifling growth.
"I don't think that our measures are blocking growth," he
said.
He said government measures "serve to emerge from a state of
crisis in which the European Union finds itself".
Economy Minister Giovanni Tria suggested it was not the EC's
remit to judge individual measures like the basic income and the
quota 100 pension reform.
Premier Giuseppe Conte said that the EU's country report on
Italy "contains growth forecasts that underestimate the impact
of the economic measures which we have launched and which will
have effects in the months to come".
Conte said on the EU's negative assessment of Italian budget
moves that "the choices of economic policy may be various. We
are convinced about our recipe and we will be proved right and
we are convinced that we must avoid the mistake of recessive
policies when the economic cycle is not favourable".
Conte said on a growth decree announced Tuesday by Deputy
Premier Di Maio that "we are focused on legal provisions, it is
my subject, I'm also a jurist. But I'm fully aware that the
technical-political-legal aspect is fundamental but the
perspective must not be missed: the government has a fierce
determination to work, it doesn't settle for adopting measures".
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