04:37 GMT30 July 2021
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    The European Commission has rejected Italy's financial plan citing the nation's non-compliance with fiscal recommendations. The commission’s vice-president Valdis Dombrovskis gave Rome three weeks to make amendments.

    Sputnik has discussed the disagreement between the EC and Italy with Roberto D'Alimonte, a political science professor at Rome's Luiss University.

    Sputnik: What do you make of the latest disagreement between the EC and Italy on the Italian budget?

    Roberto D'Alimonte: This is something that was expected in a sense; that we know that the new Italian government wanted to challenge the European rules on the budget deficits and challenge the commitments made by the previous government. So we expected that, but at the same time this is an unprecedented event between a government who is determined to challenge these rules and its commitments in EU institutions and, frankly, I don't know how it will end up.

    Sputnik: What is that money being spent on and do you think that the European Union has reason to be concerned about this budget or is that perhaps being allocated in such a way as to stimulate growth?

    Roberto D'Alimonte: The point is, I think, the European Union would be less concerned if the budget was more focused on investments. In other words, if the deviation from the rules and from the commitments was because of major investment plans. This is not the case because the measures in the budget and particularly what is called the citizenship income in pension reforms are focused on putting money into people's pockets.

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    So their focus is not on investments but the focus is on boosting consumption, private consumption, demand, hoping that by boosting domestic demand, growth could pick up. This is a hypothesis and we should see if this is true or not, but the European Union is concerned that this is not true; that some of the assumptions behind the estimate in the budget are too unrealistic, and so that's why the clash.

    Sputnik: What are your thoughts if the situation is deadlocked, what would that do politically in Italy or actually as far as Italy's relationship with Brussels? And do you think there's a chance that this would be resolved actually, do think that Salvini will be explain why this budget will work?

    Roberto D'Alimonte: The confrontation will continue until the next European elections. I do not see a conventional solution. Neither side will back down. They will continue to bicker, to argue until next May and then there could be a new warning after the European elections next May; but as I said it's not the bickering, the conflict between the government and Brussels and the European Union that matters.

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    What we have to look at is the interest rate on Italian treasury bonds, the markets; what will make the difference is the market because if the spread is going to go up to 400 — 450 or 500 then clearly the sustainability of the debt will be in doubt. Then things will start to change and we're going to see people realize that their mortgage rates are going up, the banks will close off the credit lines to companies and the picture will change and then maybe public opinion will change too. Once public opinion feels the impact of the crisis, but until then I see it stagnating.

    The views expressed in this article are solely those of Roberto D'Alimonte and do not necessarily reflect the official position of Sputnik. 

    The views and opinions expressed in the article do not necessarily reflect those of Sputnik.


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