European Union governments and institutions are set for intense budget negotiations ahead of a 17 November deadline, with Italy complaining not enough spending is planned for handling migration, security threats and youth unemployment.
The EU’s executive European Commission proposed in September that a mid-term review of the current budget should boost spending on jobs and growth, migration and security by €13 billion euros in 2017-2020, reallocating funds from other areas.
As EurActiv.com disclosed on 12 January, the tiny tweaks to the EU budget under the midterm review amount to a further disbursement of €12.7 billion hidden in EU coffers.
But Italy, which holds a constitutional referendum on 4 December that could end the political career of Prime Minister Matteo Renzi and move the eurosceptic 5-Star Movement closer to government, said on Tuesday it was not satisfied with the plan.
Italian Prime Minister Matteo Renzi suggested today (14 November) that he may not stay on if a referendum on constitutional reform that he is championing fails.
“Italy opposes the review of this multi-year budget,” Italy’s Europe Minister Sandro Gozi said in Brussels yesterday (15 November).
“We think we still need a proposal which gives us many more guarantees on a real increase in resources for our nation. I am thinking of immigration, I am thinking about security, I am thinking about European resources for the young.”
The European Union operates on the basis of seven-year budgets to finance various projects important for the 28-nation bloc, like raising the standard of living in its less developed regions, agriculture, clean energy or creating jobs.
The current budget, which ends in 2020, is worth 1.04% of the EU’s gross national income (GNI). The EU agreed to review its spending priorities by the end of 2016 to reflect economic trends and whatever challenges may arise.
Budget hawks appeared to gain the upper hand in the latest budget draft presented by European Council President Herman Van Rompuy, cutting back still further a version of the 2014-2020 budget presented two months ago.
Gozi said Italy was “very tired of European ambiguities, very tired of European contradictions,” and of “a Europe that says certain things, but doesn’t do them.”
“We are convinced that if Europe doesn’t change then we are at the beginning of the disintegration of Europe,” he added.
The 17 November deadline for a deal between the Commission, EU governments and the EU parliament stems from a 21-day legal conciliation period that started in October.
“Tomorrow our negotiating parties are meeting and there will be negotiations the whole day tomorrow and then if necessary during the night and then the whole day after,” a Commission spokeswoman said.
If there was no deal by midnight on Thursday, she said, the Commission would have to quickly make a new proposal which could be negotiated by mid-December – the last legal deadline set by the final plenary sitting of the European Parliament this year.
Italian Prime Minister Matteo Renzi yesterday (25 October) threatened to veto the EU’s budget over a lack of solidarity from the rest of Europe as the bloc struggles to manage the refugee crisis.
Modest growth in Italy
Renzi seized on Italy’s return to modest economic growth yesterday to promote his reform agenda ahead of the constitutional referendum upon which he has staked his political future.
The Italian economy rebounded slightly more strongly than expected in the third quarter after stagnating in April-June – welcome news for Renzi ahead of the referendum.
“With reforms, GDP rises,” Renzi wrote on Twitter. “Full steam ahead.”
Gross domestic product in the euro zone’s third-largest economy rose 0.3% in July-September from the previous quarter, statistics institute ISTAT said yesterday. Year-on-year growth accelerated to 0.9% from a downwardly revised 0.7% in the second quarter.
But as Italians get ready to vote on Renzi’s plan to reduce the role of the Senate – parliament’s upper house – and curb the powers of regional governments, plenty of risks to the economic outlook persist.
Among the biggest concerns is a lack of lending to firms by banks struggling with bad debts of more than €200 billion that built up during a slump at the start of the decade.
Italy has asked for more time to sell four small savings banks it bailed out last year, the European Commission said on Friday (29 September), saying it was open to the request.
With one of the world’s largest public debt piles, Italy’s borrowing costs are closely watched as a potential flashpoint for market instability in the wider euro zone.
Many Italians feel that Renzi, who came to power in 2014 vowing to “demolish” old political structures and breathe life into a moribund economy, has not delivered on his promises.
“He seemed like something new, but he has betrayed some of that spirit,” said Pietro Manetta, a 50 year-old lawyer who lives in Rome and plans to vote ‘No’ in the referendum.
Promised reforms to the sclerotic public administration, justice system and taxation have not yet brought tangible benefits to people’s pockets, and youth unemployment has stayed close to 40% despite a 2014 labour market reform.
Italy has defended its rule-breaking 2017 budget to the European Commission, saying the migrant crisis, post-earthquake reconstruction and lower-than-expected growth were to blame.