"In spring 2018, Italy was identified as having excessive macroeconomic imbalances (European Commission, 2019d). The imbalances identified related, in particular, to high public debt, low productivity growth, high unemployment rate and the stock of non-performing loans… Italy’s remaining imbalances are not expected to unwind in the near term or could even deteriorate," the report said.
The report also stressed that Italy's debt-to-GDP ratio remained really high, while its reduction was hindered by the government's current fiscal plans, weakening economic recovery and still higher borrowing costs. The report added that although some structural reforms were implemented by the government, the reform momentum significantly slowed down since 2018.
At the end of last year, the Italian parliament gave its final approval to the draft legislation on the country's state budget for the year of 2019, which had triggered a sharp conflict between Rome and Brussels pushing the European Union to consider the possibility of launching a debt-based excessive deficit procedure (EDP) with respect to Italy.
Italy's final state budget abandoned previous plans to increase VAT, introduced unconditional basic income and included a provision providing for amending the country's current laws in order to ensure earlier retirement.
While Italy's budget deficit falls within EU limits set by the Stability and Growth Pact, which states that the deficit for EU members must not exceed 3 percent of their GDP, the country must also have a public debt that is below 60 percent of its GDP — Italy’s debt exceeded 130 percent of its GDP in 2017.