Has the EU overstepped the mark by rejecting Italy’s budget?
Matthew Elliott, senior political adviser to Shore Capital, says YES.
From the moment Britain’s Brexit referendum was announced in 2013, the EU started to moderate its most overt interventionist instincts, minimising Eurozone problems through quantitative easing, and restricting its tendency to meddle in the affairs of member states.
But as the Brexit process draws to a close, we are beginning to see the EU’s natural instincts come back to the fore.
Supported by integrationist politicians, the EU has long wanted to increase its control over member states’ budgets, as a means of shoring up the Eurozone. There has also been talk of greater debt sharing and even fiscal transfers among Eurozone members. And, in his State of the Union address last year, Jean-Claude Juncker raised the prospect of forcing all EU member states to join the euro, bringing wealthy Denmark and Sweden into the fold.
In rejecting Italy’s budget, the EU is continuing this trend towards greater control. It might be acting logically in the context of protecting the euro, but it is also storing up further issues of democratic legitimacy for the future.
Beatrice Faleri, an economist and freelance writer, originally from Italy, says NO.
The European Commission had no choice but to reject Italy’s budget.
Even with the generous (some would say unrealistic) forecasts for Italy’s GDP growth, the projected deficit expansion violated the 1997 EU stability and growth pact. Italy had previously pledged a reduction of its public debt to 0.6 per cent of GDP – this budget would increase that figure to 0.8 per cent.
Realistically, the EU can do relatively little to ensure that the pact is respected – if applied, any sanctions would be modest. But with the EU’s stability as an institution at stake, the Commission cannot afford to turn a blind eye.
Aside from the political implications, the economic consequences of this version of the Italian budget would be disastrous. With Moody’s downgrading the country’s debt and the banking sector perpetually on the brink of collapse, the risks for Italian consumers are very real. Deficit growth in a country like Italy is simply not sustainable, and it would have serious consequences on future generations, in Italy and in the rest of Europe.
The Commission had to act – for itself, for Italy, and for all Europeans.