Italy to get warning over budget deficit

Euobserver ^ | 13.04.2005 | Lucia Kubosova

[ScaniaBoy]

Brussels has warned Italy about potential reprisals for its rising deficit, suggesting Rome had previously under-reported its real accounts.

Economic Affairs commissioner Joaquin Almunia said the Commission would probably launch a formal procedure against Italy by the end of June.

Speaking at an EU finance ministers' meeting in Luxembourg, Mr Almunia suggested the action would follow the newly revised stability and growth pact.

The new rules underpinning euro membership are seen as less strict by some observers, but the deficit ceiling for euro zone countries remains at three per cent of GDP.

Brussels has rejected official Italian reports about the country's deficit, which put the figures at 2.9 per cent and 3.0 per cent in 2003 and 2004, respectively. The EU statistics office is set to revise the data soon.

EU officials expect Italy's deficit to reach 3.6 per cent this year and 4.6 per cent in 2006, which would violate the pact.

If member states approve the Commission's report on Italy, Brussels could make a list of recommendations to curb the excessive debt.

Analysts expect the move to fly in the teeth of Silvio Berlusconi's plans to slash income taxes ahead of 2006 general elections.

Greece off the hook

Meanwhile, EU finance ministers have called off deficit procedures against Greece.

European finance leaders accepted a Greek promise to bring the deficit down, with Athens backing up the stance with concrete proposals such as tax hikes.

Greece has so far failed to stay below a special limit brokered for the country due to the financial burden of the Olympic games.

Last year, the country's deficit hit an estimated 6.1 per cent, but the cabinet plans to cut it down to 3.7 percent this year and 2.9 percent in 2006.

Mr Almunia said the European Commission was also closely monitoring the budget situation in France and Germany this year, with Berlin causing concern due to weak economic growth forecasts.

[ScaniaBoy]

No doubt about it. Italy has cheated, but so has Germany, France, Belgium and Greece (just to mention some of them). Why then is Italy singled out for punishment? Because of the promised tax reductions!

Greece promises tax hikes - ok!

When Ireland was running a large budget SURPLUS and decided on tax cuts, EU threatened them with fines if they didn't change their policy (too high inflation).

In short the EU runs a high tax economy, where tax reductions in ANY country is seen as a threat.

Still want to bet on the Euro?

[sanchez810]

No. The E.U. has a record of opposing candidates it does not like ( i.e. right wingers). Also, E.U. pimp Romano Prodi is Berlusconi's prime rival in the coming elections.

[expat_panama]

That makes sense. IOW, the EU is becoming a facade for France and Germany to strut around.

Like the US proved 150 years ago, there's a lot more to this Union stuff than just signing papers.

[Owl558]

The stability and growth pact is a joke. They should stop pretending. Certain countries get to flaunt the pact pretty much at will, while others may not.

Very Orwellian.

[a freedom-loving italian]

Also, E.U. pimp Romano Prodi is Berlusconi's prime rival in the coming elections.

Yeah, and like Giulo Tremonti (head of Berlusconi's conservative party) said: "putting Romano Prodi at the head of gov't is like putting Osama Bin Laden at the head of counter-terrorism!!)

Ya know, Italian middle class has been impoverished because of these two factors: 1. the introduction of the Euro 2. the unfair chinese competition. And ya know what? Romano Prodi is responsible for both of these two factors as he was serving as the head of EU commission during the past few years...while Silvio Berlusconi was trying to relieve the tax burden of Italian taxpayers.

Unfortunately, people who have been hit by economic constraint don't quite think of it and simply vote against the current gov't.

What a mess!

[a freedom-loving italian]

No doubt about it. Italy has cheated

Hey man, when Italian gov't says is gonna have a 3% deficit while some eurocrat says the deficit is going to be 3,7% that is NOT cheating. It is simply taking account of a weaker economy growth caused by the nutty socialist policies of France and Germany.

In short the EU runs a high tax economy, where tax reductions in ANY country is seen as a threat.

Ditto!!!

[sanchez810]

Just look at how the E.U. is clovering Greece's new Prime Minister ( a right winger).

[sanchez810]

I really dislike Romani Prodi. You should see how the Eurocrats have been clovering Greece's Prime Minister (a right winger). Ciao

[a freedom-loving italian]

I really dislike Romani Prodi

My feeling exactly ;-)

Ciao

[sanchez810]

whar about berlusconi?
he constantle critizes the E.U. yet supported the ratification of the consitution. Now Italy The land of Victor and garibaldi hasth cone undone.

[a freedom-loving italian]

what about berlusconi?
he constantly criticizes the E.U. yet supported the ratification of the constitution.

Well it is the only reasonable thing he can do right now

Ya know, traditionally Italian public opinion is strongly pro-EU as Italians used to think that EU means 1. no more bloody war 2. sound economic & budget policy 3. an insurance that Italy is going to preserve her current int'l medium-power status for a very long time. Only recently some people has begun to doubt that the EU is really the way for Italy to improve her condition.

But Berlusconi has already pissed off much of this pro-EU public opinion by standing firmly with President Bush on the war in Iraq so he cannot take any further anti-EU stand if he is to be reelected next year!

Anyway don't bother too much about the EU constitution: according to last polls even the Frenchies are going to oppose it, so there's absolutely no chance that the constitution will be enacted.

Ciao

[sanchez810]

The E.U. constitution scares the hell out of me, I hope it goes down. The E.U. wont to help you out in with those three goals, It's quite evident when you see how Brussels works.Also, It's a paradox since there wont be an Italy anymore, in it's place a European Region, what you said make no sense.

[a freedom-loving italian]

The E.U. constitution scares the hell out of me, I hope it goes down.

Look, i m quite scared too. But again, even the Frenchies are not going to approve the constitution, so it will go down for sure. Ya know, France is the most pro-EU country in Europe as it is the country which gets most of the money from the EU. And I m also counting on the UK to sink the constitution, as the UK is traditionally very Euro-skeptic.

The E.U. wont to help you out in with those three goals, It's quite evident when you see how Brussels works.Also, It's a paradox since there wont be an Italy anymore, in it's place a European Region, what you said make no sense.

I know that, i was only answering to your question as why Berlusconi cannot afford to reject the constitution.

Ciao

[SunkenCiv]

CIA - The World Factbook -- France
last updated on 10 February, 2005
http://www.cia.gov/cia/publications/factbook/geos/fr.html

"The current government has lowered income taxes and introduced measures to boost employment. The government is focusing on the problems of the high cost of labor and labor market inflexibility resulting from the 35-hour workweek and restrictions on lay-offs. The government is also pushing for pension reforms and simplification of administrative procedures. The tax burden remains one of the highest in Europe (43.8% of GDP in 2003). The current economic slowdown and inflexible budget items have pushed the 2003 deficit to 4% of GDP, above the EU's 3% debt limit. Business investment remains listless because of low rates of capital utilization, sluggish demand, high debt, and the steep cost of capital."


Business blamed for lack of growth
18.04.2005 - 18:13 CET | By Meghan Sapp
http://www.euobserver.com/?aid=18876&print=1