Italy finally squeezed a budget through parliament, averting a head-on collision with the EU

Italy flag jets

  • Italy’s parliament passed a budget with less than 48 hours to spare, closing a turbulent chapter for the country.
  • Earlier in December, after weeks of wrangling, Rome and the European Union agreed an uneasy compromise on the budget.
  • A previous Italian government had agreed with the EU not to increase its deficit above 1.8% of GDP.
  • Its populist successor wanted to bust the limit, and run a deficit as high as 2.4%.
  • In the end, Italy settled for the compromise figure of 2.04%, reducing spending by almost $7 billion to meet the lower threshold.
  • Italian stocks have bounced on the news, with the country’s FTSE MIB around 1.5% on the last day of 2018.

Italy’s parliament approved the country’s uneasy compromise budget with the European Union on Saturday, finally ending several months of uncertainty over its fiscal future.

With a year end deadline to pass the budget in the country’s parliament, Italy passed the legislation with just over 48 hours to spare.

The dispute centred on how large a deficit the Italian government proposed to run.

A previous government had agreed with the EU to keep the deficit below 1.8% of Italy’s GDP.

Italy’s new, populist government had proposed to increase the deficit to 2.4% of GDP.

On December 19, Brussels and Rome agreed a compromise budget after a long period of negotiations, to allow a deficit of 2.04%, some €6 billion ($6.7 billion) less than the first proposal.

Lawmakers in the country’s lower house approved this budget by 313 votes to 70 on Saturday evening.

„I hope this will be the last budget being approved after long and complicated negotiations with Brussels,“ Matteo Salvini, Italy’s deputy prime minister and leader of the Lega Nord said in an interview with the Corriere della Sera newspaper on Monday.

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The agreement will provide the „basis for balanced budgetary and economic policies in Italy,“ Valdis Dombrovskis, the EU’s most senior official dealing with the euro and financial systems, said at the time.

Italy, however, „urgently needs to restore confidence in its economy to ease financial conditions and support investment,“ he added, describing the solution as „not ideal.“

The agreement means Italy will no longer be subject to the so-called Excessive Deficit Procedure, which has the power to fine countries within the eurozone that break the bloc’s spending rules. Italy’s entry into the EDP was set to be announced on the day the budget was initially agreed.

Markets welcomed the news of the budget passing through the Italian parliament, with Italy’s benchmark share index, the FTSE MIB, up 1.44% after around an hour of trading on New Year’s Eve.

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Source: Business insider

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