EU raises concern about Italian public spending

EU raises concern about Italian public spending

AFP

BRUSSELS: Most EU member states should continue to invest to support the continent’s economic recovery, but heavily-indebted Italy should rein in public spending, the European Commission warned Wednesday.
“The economy is bouncing back from the recession, driven by a rebound in demand across Europe,” EU executive vice-president Valdis Dombrovskis said. “But we are not out of the woods yet. The economic outlook remains riddled with uncertainty,” he said, warning that the coronavirus is still spreading, prices are rising and supply chains face disruption. Despite these unpredictable threats, European officials predict a strong recovery, and want eurozone governments to maintain their “moderately supportive fiscal stance” to support investment.
Italy, however, remains a worry. Its public debt passed 155 percent of its GDP last year, and Brussels is worried that it is still budgeting to spend too much next year.
“In order to contribute to the pursuit of a prudent fiscal policy, the Commission invites Italy to take the necessary measures within the national budgetary process to limit the growth of nationally financed current expenditure,” the commission report said.
The commission did not say by how much Italy’s spending plans should be reduced, and its recommendation is not binding on the government.
The European Union suspended its fiscal discipline rules last year, allowing eurozone members to boost their public spending to help their economies survive the Covid-19 pandemic.
But the European commissioner for the economy, former Italian prime minister Paolo Gentiloni, said governments should now “gradually pivot fiscal measures towards investments”.
“Policies should be differentiated across the euro area to take into account the state of the recovery and fiscal sustainability,” he said.
“Reducing debt in a growth-friendly manner is not necessarily an oxymoron.”