The European Commission, in its communication earlier today, said that "the budget laws of all the countries of the Euro area do not substantially violate the obligations of the Stability and Growth Pact and that it is not necessary to request revised budgetary plans''. The Commission's opinion on the Italian Stability Law (budget) for 2014 notes a risk that "the Draft Budgetary Plan for 2014 does not ensure compliance with the rules of the SGP. In particular, the Commission Forecast points to a risk that the Draft Budgetary Plan will not allow reducing the debt-to-GDP ratio in line with the debt reduction benchmark.” ''
This assessment stems from an estimate of GDP growth, which, as has been noted, does not coincide with the forecast of the Italian Government and has implications for the budgetary projections. It should also be noted that the growth of the debt/GDP ratio is the result of the recession that lasted until 2013 and the payment of past-due trade payables of the public administrations (almost 50 billion € in 12 months between 2013 and 2014), an operation agreed upon by the European Commission. The financial support to Eurozone countries in financial trouble also contributed to the debt dynamics.
In addition, in formulating its opinion, the Commission does not take into account important measures announced by the Government but not formally incorporated into the Stability Law, and those measures already in the implementation phase. Such measures, on one hand, represent a stimulus to the economy. On the other hand, these measures will generate additional revenue and cost savings that the Government will use to further reduce the deficit and the debt in 2014, as well as to lighten the tax burden on families and businesses. These interventions include noteworthy measures such as the Spending Review (the work program of the Spending Review Extraordinary Commissioner has already been forwarded to the Inter-Ministerial Committee for discussion in the next few days), the reform of the tax system about to be launched by Parliament, the privatization program, the return of capital held abroad illegally, as well as the revaluation of the share capital of the Bank of Italy (on the basis of an analysis already carried out and issued last week).
These measures further reinforce the innovative nature of the Stability Law for 2014. For the first time in several years, the Stability Law will launch a process of tax reductions and public spending revisions by cutting current spending, as well as increase the amount for investments over a three-year period, thereby ensuring that the investment measures may fully realise their simulative effects.
The Government agrees with the Commission on the need to continue to pursue a strategy of consolidating public finances and debt reduction, and believes that the above measures will have positive effects on the public finances, in line with the requirements of the Stability and Growth Pact, without the need for further intervention.
After the Commission's judgment, the Stability Law will be discussed by the Eurogroup on November 22.