U.S. Markets

EU executive expects firm euro zone backing against Italy: Moscovici

FUKUOKA, Japan (Reuters) - The European Commission expects strong support from euro zone finance ministers for the view that disciplinary steps against Italy are warranted over the country’s growing debt, European Economic Commissioner Pierre Moscovici said on Sunday.

FILE PHOTO: European Commissioner for Economic and Financial Affairs Pierre Moscovici presents the EU executive's economic forecasts during a news conference at the EU Commission headquarters in Brussels, Belgium, May 7, 2019. REUTERS/Francois Lenoir

The European Commission said last week that Italy’s growing public debt broke EU rules, opening the way to a possible disciplinary procedure that would trigger a clash with Rome’s anti-austerity government.

“I expect strong backing from the member states to the approach of the Commission,” Moscovici said on the sidelines of a meeting of finance ministers and central bank governors of the world’s 20 biggest economies in the Japanese city of Fukuoka.

“It means we are now telling the Italian government that we need to have data, figures, measures, that demonstrate clearly that goals on fiscal policy, on deficits, that were agreed in December are met this year and that we also have to have serious reassurance for 2020 that fiscal policy is sound,” he said.

Moscovici said he and several other euro zone finance ministers in Fukuoka held bilateral meetings with Italian Economy Minister Giovanni Tria to press that point.

“I think Giovanni Tria is very conscious of that, he met not only me in bilateral meetings, there were several meetings between the Europeans,” Moscovici said.

“Everybody is worried by the situation, nobody would like to have an Excessive Deficit Procedure against Italy, but everybody wants common rules to be respected,” he said.

European Union rules say that governments must reduce their public debt every year until it is below the EU ceiling of 60% of GDP.

But Italy’s public debt, the second highest in the EU in proportion to output after Greece’s, rose from 131.4% of GDP in 2017 to 132.2% in 2018.

The Commission estimates it will rise to 133.7% this year and 135.2% in 2020. Rome sees it at 132.6% this year and falling to 131.3% in 2020.

If euro zone governments back the Commission’s view and Rome does not offer any remedial action, EU ministers will launch the excessive deficit procedure -- the EU’s disciplinary budget action -- against Rome in July.

Such a procedure could end in fines, but this would take months and is politically unlikely.

Moscovici said the Commission, the mandate of which ends on October 31, was ready to see the process through.

“If there is an opening of the procedure it has to be done this summer, then the follow-up takes a few months but this Commission and myself will still be there to examine the next draft budgetary plans of all euro zone member states,” he said.

All euro zone countries have to submit their draft budget assumptions for the following year to the Commission for checks to see if they are in line with EU law by October 15 each year -- two weeks before the current Commission’s mandate expires.

“It must be clear that time does not play against us, nobody must consider that this is a lame duck Commission, we have the full confidence of the member states and I am quite sure the next meetings will prove it,” Moscovici said.

Reporting by Jan Strupczewski; editing by Jason Neely