Several eurozone finance ministers have come out to back Brussels in a row with Italy’s populist government over a budget that has been deemed to break the rules of the common currency bloc.
France’s finance minister, Bruno Le Maire, warned that the future of the euro was at stake as he urged the Italian government to reach an agreement with the European commission.
“The wise path is the path of dialogue, exchange of views, to find the best solution for the eurozone as a whole, for the Italian government and for our common currency,” he said on Monday as he arrived at a meeting of eurozone finance ministers. “For what is at stake now is our common currency.”
Italy doubled down on its refusal to change the budget, a week before a deadline to submit new plans to the European commission. “No little letter will make us back down. Italy will never kneel again,” Italy’s powerful interior minister Matteo Salvini has said.
Italian deputy prime minister Luigi di Maio told the Financial Times the rest of Europe should copy Italy’s expansionary public spending plans. “If the recipe works here, it will be said at a European level, we should apply the recipe of Italy to all other countries.”
The commission rejected Italy’s draft 2019 budget last month – although other member states, including France and Germany, have broken the rules in the past without sanction. Italy must submit a new plan by 13 November and will hear Brussels’ verdict on 21 November, when the commission delivers an assessment on the budgets of all eurozone members.
If the commission decides to fine Italy, it risks deepening conflict with Rome ahead of European elections in May 2019, which some EU insiders fear could boost anti-EU parties.
Italy believes it can reduce public debt – the second highest in the EU at 131% of Italian GDP – by more government spending to stimulate higher economic growth. The European commission, responsible for monitoring eurozone spending plans, thinks Rome’s assumptions are “optimistic”.
The commission has won support from the eurozone’s traditional budget hawks, such as the Netherlands. Peter Kažimír, Slovakia’s finance minister, urged Italy not to pursue “reckless policies”. He said he feared that Italy’s approach would put at risk the goal to “complete EMU architecture”.
Nerves about Italy are playing into slow-moving efforts to overhaul the rules underpinning economic and monetary union. French president Emmanuel Macron wants an agreement on a banking rescue system before the European elections, but has been frustrated by Germany’s go-slow, less ambitious approach.
Le Maire said he hoped decisions would be taken in December. “[The eurozone] is the heart of the European project and it needs to be strengthened.”