Three points on Italy, its budget and the European Commission

The European Commission has just told Italy to revise its 2019 budget plan: the deficit does not look excessive (2.4%), but the figure is deemed to be fragile as growth projections are overly optimistic….and with a government that emerged from a watershed vote, we should expect a certain degree of laxity on spending to boot. The government was not elected to do the same thing as its predecessors, i.e. there is a risk that the budget will spiral out of control and move above the notorious 3% of GDP threshold, which is incompatible with a stabilization in public debt. Italian public debt stands at close to 132% of GDP, well above the standard 60%, and this is not sustainable. Yet does a sustainable trend automatically involve a drastic cut in the public deficit? Maybe not.

There are a number of points worth raising on the budget/Italy/European Commission issue.  Continue reading

Many European countries are against reforms in Europe => Which future?

Will the Euro Area be able to reform itself ? Macron/Merkel proposals are fight en by a group of countries led by the Netherlands. They refuse any cooperative instrument in the management of the Euro area.

On July 26, 2012 Mario Draghi said that the political construction of Europe was the most important element of the European architecture. He said, the most important in Europe is people’s will to live together. The euro currency was then just an instrument that supports this political construction.

With the reaction to the Macron/Merkel proposals, I am no longer sure of Mario Draghi’s assertion on the living together hypothesis.