(23 October 2018) – The European Commission has adopted an Opinion that requests Italy to submit a revised draft budgetary plan within three weeks. It is a first in EU history.
In July 2018, the Council recommended that Italy should make a structural improvement of 0.6% of GDP. The draft budgetary plan presented by Italy instead provides for a structural deterioration amounting to 0.8% of GDP in 2019.
Both the fact that the draft budgetary plan provides for a fiscal expansion of close to 1% of GDP, while the Council had recommended a fiscal adjustment, and the size of the deviation (a gap of around 1.4% of GDP or €25 billion) are unprecedented in the history of the Stability and Growth Pact.
Italy’s public debt-to-GDP ratio, at 131.2% in 2017, is the second largest in the European Union in relative terms and one of the largest in the world. This is the equivalent of an average burden of €37,000 per inhabitant.
Debt-servicing costs absorb a considerably larger amount of public resources in Italy than in the rest of the euro area, taking a toll on the country’s productive spending. For instance, Italy’s interest expenditure stood in 2017 at around €65.5 billion or 3.8% of GDP, which was broadly the same amount of public resources devoted to education.