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06.06.19 6 FOREIGN NEWS June 11-19 After the EU Commission's opinion on Italy's debt justifying a procedure, EU fi nancial ministry offi - cials on the bloc's Economic and Financial Commit- tee have two weeks, until June 19, to decide whether to back the EU executive's assessment. e decision is expected to come before regular meetings of the bloc's fi nance ministers on June 13-14. If national offi cials back the debt report, the Com- mission could at any time recommend the formal opening of a disciplinary procedure. June 20-21 EU leaders meet in Brussels for a quarterly sum- mit. e meeting could off er Italian Prime Minis- ter Giuseppe Conte a chance to discuss the possi- ble debt procedure with the outgoing Commission president, Jean-Claude Juncker. July 8-9 EU fi nance ministers gather in Brussels for a reg- ular monthly meeting, where they are expected to decide on the possible formal opening of discipli- nary proceedings against Italy, if recommended by the Commission. Once the procedure is started, Italy will be re- quired to adopt measures, such as higher taxes and spending cuts, to correct its deviation from fi scal targets within three or six months from the begin- ning of the procedure. July 29 If the EU fi nance ministers open a disciplinary pro- cedure, July 29 would be the deadline for the Com- mission to propose what would be unprecedented fi nancial sanctions against Rome. If deemed in "se- rious" breach of EU rules, the Italian government could be required to lodge with the Commission a non-interest bearing deposit worth 0.2% of GDP - around 3.5 billion euros. Aug. 7 Euro zone governments would have 10 days, until Aug. 7, to block by qualifi ed majority a Commission proposal to impose sanctions. Sept. 20 Italy presents updated growth and public fi nance targets, which will be the framework of its 2020 budget. Mid-October First possible deadline for Italy to meet, in its 2020 draft budget, the fi scal requirements imposed by the EU in the disciplinary procedure. Failure to act could trigger further sanctions, in- cluding a fi ne of up to 0.2% of GDP, the suspension of billions of euros in EU funds and closer fi scal monitoring by the European Commission and the European Central Bank. Further failure to cooperate could incur even strict- er penalties. ose might include a fi ne of up to 0.5% of GDP, a cut of multi-billion-euro loans from the European Investment Bank, and EU precautionary monitoring over Italy's plans to issue new debt. Nov. 1 e new Commission is expected to take offi ce, unless the mandate of the existing executive is ex- tended. EU threatens Italy with disciplinary action over its rising debt load THE European Commission, the EU's executive arm, announced Wednesday that disciplinary pro- ceedings against Italy are war- ranted because it's breaking fi scal rules over its rising public debt. e Commission said that in its latest assessment of member states' compliance with defi cit and debt rules, it had conclud- ed that when it comes to Italy "a debt-based EDP is warranted." An EDP stands for an "Exces- sive Defi cit Procedure" and is an action launched by the Europe- an Commission against any EU member state that exceeds the budgetary defi cit ceiling or fails to reduce their debts. If an EDP went ahead, Italy could face a fi ne of around 3 billion euros ($3.4 bil- lion), according to some reports. "( e report) concludes that the debt criterion is not complied with and thus a debt-based exces- sive defi cit procedure is warrant- ed," Valdis Dombrovskis, the EU Commission vice-president for the euro and social dialogue, said at a press conference. "To be clear, today we are not opening the EDP. First, EU mem- ber states have to give their views on ... the report and the (EU's) Eco- nomic and Financial Committee has two weeks to form its opinion on our conclusions. But it's much more than just about the proce- dure, when we look at the Italian economy we see the damage that recent policy choices are doing." Worryingly for the Commission, Italy (Europe's third-largest econ- omy) has the second-highest debt pile in the EU (expected to reach 133.7% this year) and was asked to explain why its debt had risen in 2018. Dombrovskis said the Commis- sion estimated that Italy's spend- ing to service its debts in 2018 turned out to be 2.2 billion euros higher than expected in its 2018 spring forecast. He added that the country pays as much toward its debt servicing as it does toward its entire education system. "Growth has come to almost a halt ... and we now expect the Ital- ian debt (to GDP) ratio to rise in 2019 and 2020 to over 135%," he said. Italian banking stocks fell 1% on the announcement Wednesday and the country's bond prices (the amount investors will pay to hold Italian debt) also declined, signal- ing a drop in risk appetite toward the country. e Commission presented what is known as its Semester 2019 Spring Package on Wednes- day which amounts to 27 coun- try-specifi c recommendations which set out the Commission's economic and social policy guid- ance for member states for the next 12 to 18 months. Italy's coalition government — a fractious alliance between the eu- roskeptic Lega party and anti-es- tablishment Five Star Movement — has been on a collision course with the European Commission since it announced its 2019 budget plans which foresaw the coalition increasing spending and breaking a budget defi cit target previously agreed by the former government. e coalition initially agreed to lower its defi cit target, to 2.04%, but then revised this upwards again. e friction has put Economy Minister Giovanni Tria in a tricky position trying to navigate be- tween Lega and M5S leaders' de- mands for more spending and the Commission's demands for less. He promised the Commission that the 2020 budget would be compliant with the Commission's rules. It's likely that the EU will want to avoid launching punitive meas- ures against Italy given concerns over rising euroskepticism in the country. EU Commissioner Pierre Moscovici said Wednesday that the "door remains open to avoid a disciplinary procedure against Italy." Italy's Prime Minister Giuseppe Conte (who does not belong to ei- ther the Lega party or M5S) said he would do his utmost to avoid any EU procedure, Reuters re- ported. Earlier on Wednesday, however, the Lega party's economic chief Claudio Borghi said the party would not accept any tighten- ing measures this year and that Tria must take "a hard line on EU budget talks," Reuters said. Whether that bullish stance will continue in the face of potential punishment from the EU remains to be seen. The possible next steps From left: Italy's Deputy Prime Minister and Minister of Economic Development, Labour and Social Policies, Luigi Di Maio, Italy's Prime Minister, Giuseppe Conte and Italy's Deputy Prime Minister and Interior Minister, Matteo Salvini

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