Italian Government: European budget rules hinder economic growth

The Italian government has shown some resilience between yesterday and today in response to Germany’s proposals, which amounted to near-impositions, regarding the new guidelines for the European “Stability Pact,” which should guide each state’s budgetary policies. The Maastricht rules stipulate a 3% deficit/GDP ceiling as well as an unworkable 60% debt/GDP ratio cap, both of which were deemed unworkable in 1993 and remain so today. Although the Commission has stated that these restrictions should be loosened, many people object to the centralization of an arbitrary power that determines which budgets are correct and which are not. Germany wants even more stringent regulations: it wants a 1% GDP/deficit limit along with stringent guidelines meant to cut debt. The ironic thing is that the German government was practically found guilty by the Supreme Court of falsifying the national budget to conceal deficits and debts.

Yesterday, the Italian Minister of Economy, Giancarlo Giogetti, in a hearing before the budget committees of the Chamber of Deputies and the Senate, said:

“The provision of additional constraints compared to those proposed by the Commission could lead to an outcome that is not fully in line with the objectives of the reform as outlined starting from the Commission’s Communication itself: that is, an arrangement characterised by simplicity and a greater balance between the objectives of economic growth, the promotion of the ecological and digital transition, and the sustainability of public debt.”. ‘On deficit and debt, the answer is seriousness,’ he said, ‘which means making commitments that can be kept. In the face of challenging rules, we can also somehow accede, but with respect to rules that are impossible to maintain, I do not believe we can say yes out of seriousness’.

In this way, Giorgetti responded to the most absurd and extreme demands coming from Germany on the subject of the budget. Berlin is, at the moment, isolated: on the one hand, France has to make major investments to renew its nuclear park; on the other, Spain is preparing for forced decentralization, whose budgetary consequences are uncertain. Berlin’s rigid stance, which in the end only serves the liberal minister Lindner to justify his stay in government, therefore finds few friends outside of Berlin and Brussels, as it always trails the Germans.

Italian Prime Minister Giorgia Meloni confirmed this position:

“We cannot approve a pact that we know we cannot respect,” she said, referring to the German proposals to reform the Stability Pact. “These are the tight hours of this negotiation; it is a very delicate moment.” ‘We believe that a serious Europe must take into account in the new governance rules the strategies it has given itself,’ she added. ‘We have the NRP, the energy transition, and digital; we cannot disregard the investments that Europe is asking for. We are doing our best to build an effective but reasonable synthesis’.

This discussion also involves the Italian approval of the reform of the ESM, the European Stability Mechanism, the private but state-funded fund that, on the one hand, should finance banks in the event of their default, but on the other, should also arrogate to itself the right to judge the quality of public debts and could impose harsh austerity measures of its own power, as happened in Greece. This is too much power for a body that is private, answers to no one, enjoys broad legal immunity, and would, in any case, seek funding from the states in order to be able to intervene. The Italian Parliament has repeatedly spoken out against its reform in a harsher sense and will soon be called upon to vote on the issue again. The League and Fratelli d’Italia have always spoken out against it.