IMF promotes Italy halfway. EU infringement? Who cares

(by Massimiliano D'Elia) The IMF letter on the economic situation and maneuver, just presented to the Commission in Brussels, does not close the door to Italy, indeed! It is not displeasing to the Americans that the Italian government focuses on development and social inclusion. The objective of a powerful development, however, is achieved only with structural reforms capable of boosting productivity, with a modest and gradual consolidation of public finances, but capable of ensuring a constant decline in debt. Italy, highlight the experts, must eliminate the uncertainties on the sustainability of public debt. The IMF estimates that Italian growth will remain around 1,0% in the 2018-2020 range. Italy's desired and estimated growth is instead 1,5% in the 2019 which is not in line with the FMI estimates, ie a growth equal to 0,7%.

On the other hand, as regards debt, the expert forecasts for the 2019 stand at 2,6% - 2,7% of GDP, that is between the Italian government's target 2,4% and that of the EU Commission, 2,9%. The government yellow-green, then decided to pull straight and do not change line, no corrective horizon.

Let's see, therefore, in detail the major points on which the IMF focused the analysis.

Public investments

The Fund promotes the decision to increase public investment and recognizes the importance of providing the country with a modern scheme of minimum income poverty, but recalls that international best practices fix the disbursements between 40 and 70% of the relative poverty level and they make sure they do not discourage work.

Pensions

"Interventions on pensions could increase pension spending and its weight on the younger generations that would undermine future growth policies, thus increasing unemployment".

Revenue authorities

The American experts advise against using multiple measures such as the flat tax for the self-employed and other measures because the Italian problem is to increase the tax base. The only way is to create a virtuous and stable system that leads to definitive tax obedience.

Financial system

Also in terms of the financial and banking system, the Fund notes that the situation has improved a lot in the last two years. There are no corrections to make, but the IMF offers collaboration to reduce risks and push reforms on the road to stability and growth.

What will Italy do?

After an assessment by the IMF that does not condemn "in its entirety" the maneuver and the Italian accounts, the infringement procedure, banned by the EU institutions against Italy, is less scary. It should not be overlooked that next May there will be elections for the European Parliament and the possible start of an infringement procedure, against the Bel Paese, could provide a unique and winning for the election campaigns of all movements European populists. The government yellow-green, therefore, pulls straight because the start of a possible "infringement procedure" requires very long times to reach a possible final sentence, well beyond, then, the outcome of the European Parliament elections in 2019. The game is worth the candle !!!

How does the infringement procedure work?

After the rejection of the maneuver, the government has 3 weeks to send a new draft budget document on the basis of European rules and will have to receive the opinion of the Commission again.

The Community rules state that the Commission should present its own opinion on individual national budgets by the end of November, which is why a meeting has been organized to the 21 November.

If the government decides not to make any changes, the EU would proceed with the opening of an infringement procedure for excessive deficit and violation of the debt rule.

The infringement procedure could only be opened in the spring of the 2019, when the EU would demand a return from the excessive deficit, also specifying precise time brackets to be respected.

The process could therefore last a couple of years to end with sanctions in case of non-return of the excessive deficit.

This is a procedure governed by the Article 126 of the Treaty on the Functioning of the European Union. According to the 126 article, EU countries must demonstrate solid public finances and meet two criteria.

  1. their budget deficit should not exceed 3 per cent of gross domestic product (GDP)
  2. public debt (government debt and public sector debt) must not exceed 60 per cent of GDP

If the criteria are not met, the Council initiates an infringement procedure based on the Commission's recommendations.

The procedure requires the country in question to provide a corrective action plan and corresponding policies, as well as deadlines for implementing them. Eurozone countries that do not follow the recommendations can then be fined.

The Italian government will most likely play this game at the highest risk for the country but also for the estate and credibility of its electorate.

However, in the face of the continuous rigor and austerity, signed by previous governments, perhaps today it is worth trying to create that short circuit necessary to move community balances that no longer respond to the current political situation and the new global challenges. We need to think seriously about a united Europe and not about a Europe that continues to quarrel at home, outside of China, the USA and Russia laugh in great secrecy.

Really united Europe will have to be a goal to be pursued to survive and it is no coincidence that Angela Merkel has once again proposed the establishment of a European Army.

Germany, France and Italy must stop playing, there is the future of the next generations.

 

IMF promotes Italy halfway. EU infringement? Who cares

| EVIDENCE 4, ITALY |