The European Commission (EC) has today said disciplinary procedures should be launched against Italy over its high levels of government debt.
Read more: Italy could face €3bn fine over public debt
The move will further inflame the row between Brussels and Rome over the issue of debt, as the Italian government seeks to cut taxes and increase spending.
Today, the European Commission – the European Union’s executive arm – said that Italy had not kept its word on a 2018 plan to reduce its debt.
It added that its deficit was projected to overshoot the EU’s three per cent limit in 2020. Italy’s public debt stood at 132 per cent of GDP in 2018, more than twice the EU’s 60 per cent limit.
Therefore the EC said it recommended an “excessive deficit procedure”, a process to investigate Italy’s debt situation which could end up with a hefty fine.
Italy’s stock market reacted badly to the news. Its FTSE MIB index sank into the red, falling 0.8 per cent just after 12.30pm UK time.
Last week Matteo Salvini, Italy’s deputy prime minister from the right-wing Lega party, said the fine could be €3bn.
Salvini has called for the EU to change its rules on public debt – the amount of money a government owes compared to its country’s GDP – and deficits – how much money a government borrows each year to pay for public services.
The current Italian government coalition between Lega and the Five Star Movement came to power promising higher spending amid discontent with the EU’s austerity programme.
EU governments have two weeks to decide whether they back the EC’s call for a disciplinary procedure against Italy.
Valdis Dombrovskis, vice-president for the euro at the EC, said today: For Italy, there is a path to recovery and growth. Other countries have already taken it, with success.”
Read more: Italy escapes recession
He said: “This path follows a renewed reform effort to address long-standing structural weaknesses in its economy.”