Italian Prime Minister Giuseppe Conte called Monday for reform of European Union rules limiting deficits to three percent of gross domestic product, ahead of a parliamentary confidence vote in his new government.
“We also need to improve the Stability and Growth Pact and its application, to simplify the rules, avoid pro-cyclical effects, and support investments,” Conte told parliament in reference to rules that restrict European government budgets, including in heavily indebted Italy.
The pact was the main problem between Brussels and the previous government in heavily indebted Italy, which must submit a balanced budget to Brussels in the coming weeks.
Otherwise Italy could face an automatic rise in value-added tax on January 1 that would hit the poorest families the hardest and could plunge the country into recession.
Conte’s new Finance Minister Roberto Gualtieri is also reportedly “not a fan” of the stability pact under which EU members must consistently reduce deficits and target a balanced budget in the long term.
Italy’s colossal public debt currently stands at more than 2.3 billion euros or 132 percent of GDP, the highest rate in the eurozone after Greece.
Brussels is constantly calling on Rome to reduce its deficit, and thus its debt. The outgoing populist government frequently clashed with the European Commission, mainly over public spending.
The previous coalition eventually agreed to reduce the deficit to 2.04 percent of GDP in 2019, instead of 2.4 percent, but the 2020 budget will again be problematic.