Italy faces €3.5bn EU fine
The European Commission is understood to be considering proposing a disciplinary procedure for Italy next week over its failure to rein in debt, which could pave the way for a €3.5bn penalty.
The step could come as part of the EU’s regular budget monitoring process, most likely on June 5, and would mark an escalation of Rome’s budget tussle with Brussels that roiled markets at the end of 2018.
Italian bonds fell on the news, with the yield on benchmark 10-year notes climbing 12 basis points to 2.66%. The euro extended its decline to fall 0.1% to $1.1192.
Italian deputy prime minister Matteo Salvini indicated that he’ll push back against EU demands when crafting his next budget.
Mr Salvini has the upper hand in the populist coalition after his party enjoyed a resounding victory in Sunday’s European parliamentary elections.
“I’m told a letter from the European Commission on the Italian economy is on its way,” Mr Salvini said.
I think Italians gave me and the government a mandate to completely, calmly, and constructively re-discuss the parameters that led to unprecedented job instability, unemployment, and anxiety.
The Commission’s recommendation would be only one step in a long, convoluted process, which requires EU governments to weigh in several times.
EU finance ministers would have to sign off on a so-called ‘excessive deficit procedure recommendation’, at which point a “non-interest bearing deposit” of up to 0.2% of GDP —around €3.5bn — could be demanded.
EU finance ministers would have to say whether they agree with the Commission’s proposal — probably at their next gathering in early July.
If Italy doesn’t comply with the deposit request, it would be a breach of EU law.
“I am waiting to read the letter from the EU, but the Commission should acknowledge that people voted for change and growth,” Mr Salvini said.
The final decision on further fines may not come for months, after Italy is given time to correct its finances.
The EU has never yet fined a country over its budget.
The step by Brussels comes only a few months after the Commission decided against launching an excessive deficit procedure against Italy after its government pledged to rein in some of its spending.
