EU warns France, Italy over risk of breaking fiscal rules

Bloomberg

Italy and France are at risk of breaching European Union (EU) spending rules, the bloc’s executive arm said, warning that only countries with a healthy budget position should be pushing expansionary policies.
In a set of assessments, the European Commission said the 2020 spending plans of eight countries are “at risk of non-compliance.” In addition to France and Italy, Belgium, Spain, Portugal, Slovenia, Slovakia and Finland were cited. Budget plans for these countries “might result in a significant deviation from the adjustment paths towards the respective medium-term budgetary objective” the commission said.
The report also called on countries with fiscal space to invest amid growing economic risks. It noted both Germany and the Netherlands were doing this to a degree, though it said they should be doing even more.
But it was clear that those with high debt should be doing the opposite, taking advantage of low interest rates to cut debt.
Despite Italy’s perilous situation, its structural deficit is now forecast to rise and the country will miss debt reduction targets this year and next.The problem the commission identified, is that “some of those euro-area member states with no fiscal space plan either no meaningful fiscal adjustment or a fiscal expansion in 2020.”
The warning on France’s budget comes after Emmanuel Macron ramped up spending and lowered taxes in response to the Yellow Vest protests that rocked the country. For Italy, this year’s verdict at least marks an improvement from the tense standoff last year, which almost triggered a disciplinary procedure against Rome.