Italian parliament agrees with controversial budget plans

-October 12, 2018

The Italian parliament voted for the economic plans of the government, which means that the Italian budget deficit will continue to rise. The European Commission has already expressed its concerns about the plans.

Both the Italian Parliament and the Senate voted last night with the so-called ‘economic and financial document’ where the government proposes to borrow more money to pump into the economy. This should enable lower taxes, a lower retirement age and higher benefits.

The coalition government of the right-wing populist League and the protest party M5S (Five Star Movement) intends to make more debts because it would propel the economy. This is fiercely controversial because the Italian state already has an excessive debt burden. It has a size of approximately 133 percent of the gross domestic product.

In itself, high government debt is no problem. Japan, for example, is above 200 percent and in the US the debt is also running fast. The problem with Italy is that the economy has hardly grown for years. The government hopes with the extra expenditure that will boost growth. Chances are that this is indeed happening, thinks Maartje Wijffelaars, economist at Rabobank. “But that effect is one-off. And it is precisely this low growth that is structural”.

The EU has been urging for years that Rome will reduce its debt pile. The economic and financial document must reach the European Commission for approval before Monday.

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