Eurozone finance ministers have warned Italy’s populist coalition that all governments must respect the bloc’s spending rules, as they called for more detail from Rome on draft budget plans that have unsettled markets.
Arriving at a meeting of finance ministers in Luxembourg on Monday, Bruno Le Maire, France’s economy minister, stressed that the economic fate of members of the currency bloc was linked, adding that the euro area’s budget rule book was meant to protect countries from higher borrowing costs.
Mr Le Maire said that plans agreed on last week in Rome would need to be studied in detail by the European Commission, whose assessment would then be passed onto national capitals.
“I just want to make very clear that there are rules, and rules are the same for every state”, Mr Le Maire said. “Because our futures are linked, the future of Italy, France, Germany, Spain, Luxembourg, all the members of the eurozone are linked”.
Italy’s new government last week announced plans to rip up previous budget agreements with Brussels and to aim for a public deficit of 2.4 per cent of gross domestic product, far higher than the 1.6 per cent which the country’s finance minister Giovanni Tria had previously indicated he was targeting.
Mr Tria has argued that Italy’s growth will considerably outperform Brussels’ forecasts, creating more fiscal leeway, and has insisted that despite a rising deficit, debt will continue to fall.
Arriving at the Luxembourg meeting, Rome’s finance minister said he was “serene” and would explain his figures to fellow ministers today.
Mr Tria’s fate has been under question after he lost out to hardliners in his government during 11th hour budget negotiations last week. The draft spending plan — which includes flagship policies such as a citizen’s income and flat tax — has unsettled markets and sparked fears of a political showdown between the Italian government and the commission.
Brussels is due to respond to the plans when they are formally submitted, something which must happen by mid-October.
“The signals we’ve been getting so far aren’t very reassuring” said Wopke Hoekstra, Dutch finance minister and representative of one of the most fiscally hawkish countries in the eurozone. “At the same time many of the details are still unclear. As I understand it, talks [in Rome] are still continuing.”
“We should first hold our horses and wait for the full picture,” Mr Hoekstra said, adding that: “we’ve seen quite a sharp reaction from the markets”.
The European Commission has already confirmed the Italian plans represent a “very significant deviation” from commitments made by the country’s previous government
“What I note is that the Italian government seems to prioritise public expenditure,” Pierre Moscovici, the EU’s economy commissioner, said on Monday.
“Well, public expenditure can make you popular in the short term…but in the end you have to be honest about who pays. It’s always the citizens who pay”, he said.
“Rules are for everyone”, Petteri Orpo, Finland’s finance minister, said. “Everyone has to play by the rules”.