EU Delays Warning on Italy's Public Finances, Despite Rising Deficit

Strategic Insights -

The European Commission's proposal to issue a formal early warning to Italy over its rising budget deficit was delayed, giving Italian Prime Minister Silvio Berlusconi's government two months' breathing space. Finance Minister Giulio Tremonti promised to bring forward "timely and specific measures" to control the deficit, but did not provide details. The decision exposes the tension between Berlusconi's government and Commission President Romano Prodi, who will lead the center-left challenge in the next Italian elections. The European Commission forecasts a 3.2% deficit for Italy this year, while the Italian finance ministry predicts 2.9%.

Key Takeaways:

  • The European Commission recommended issuing a formal early warning to Italy over its rising budget deficit, but was delayed by two months.
  • Italian Finance Minister Giulio Tremonti promised to bring forward "timely and specific measures" to control the deficit, but did not provide details.
  • The decision exposes the tension between Berlusconi's government and Commission President Romano Prodi.
  • The European Commission forecasts a 3.2% deficit for Italy this year, while the Italian finance ministry predicts 2.9%.
  • Italian Prime Minister Silvio Berlusconi identified potential savings of €12.5bn in government expenditure.
  • Germany may fail to meet its goal of bringing its deficit below 3% in 2005.
  • The EU and Switzerland may try to settle their differences over a proposed savings tax at a meeting on May 19.
  • The impasse between the EU and Switzerland will be discussed at the Ecofin council today.

Statistics:

  • 3.2%: The European Commission's forecast for Italy's budget deficit this year.
  • 2.9%: The Italian finance ministry's prediction for Italy's budget deficit this year.
  • 2.2%: The Italian finance ministry's previous forecast for Italy's budget deficit this year.
  • €12.5bn: The potential savings identified by Italian Prime Minister Silvio Berlusconi in government expenditure.
  • 25: The number of EU member states.
  • 12: The number of eurozone member states that delayed a decision on Italy's finances.

Sources:

  • European Commission
  • Italian finance ministry
  • Reuters
  • Financial Times
  • EU officials, including Romano Prodi and Giulio Tremonti
  • Nicolas Sarkozy, French finance minister
  • Joaquin Almunia, EU monetary affairs commissioner