Italy’s Eurosceptic coalition government has proposed a heavy-spending budget as well as major tax cuts, which would increase the nation’s already-giant debt load.
The European Union is now considering whether it should compel Italy to comply with its deficit and debt requirements by launching a disciplinary procedure.
Italian Deputy Prime Minister Matteo Salvini has threatened to resign if Brussels does not let him go ahead with much-promised tax cuts.
The leader of the co-governing League party advocates introducing a flat tax into next year’s budget as well as reducing the burden for companies and families earning less than 50,000 euro’s per year.
This step, which he says is the only way to spur Italy’s near-zero economic growth, is expected to result in at least 10 billion in lost revenue for government coffers.
Brussels has long warned Italy against slashing taxes, which inevitably widens a budget deficit if public spending remains at the same level.
European regulators say Italy cannot afford these ambitious spending plans, arguing that they will only add to Italy’s sizable debt, which stood at 132% of GDP last year.
The European Commission said in a 5 June report that Italy had made little progress in addressing its recommendations (such as reducing old-age pensions), and that further anti-austerity measures may negatively affect Italy’s growth potential.
Sputnik/ ABC Flash Point Austerity News 2019.