EU said to see Italy’s 2019 deficit at 2.9% under current proposal

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According to multiple reports in the Italian media

  • EU doesn’t see Italy public debt falling next year
  • EU sees Italy deficit widening through 2020

The European Commission is reportedly not buying into the Italian government’s growth story. The reports say that they are viewing Italy’s 2019 growth target to be 1/3 below the government’s forecast in the budget proposal.

For some context, Italy’s government delivered a forecast of growth in 2019, 2020, 2021 to be 1.5%, 1.6%, 1.4% respectively. As mentioned before here, that’s kind of a stretch considering how poorly Italy’s economic conditions have been as of late. And the latest figures we have seen from the Q3 preliminary GDP estimates and October PMI prints only served to compound the matter.ForexLive

With those forecasts, Italy is projecting a deficit of 2.4% for next year but according to the European Commission, their more “realistic” forecasts will highlight that Italy’s deficit is to come in at 2.9% instead.

In short, there’s a 0.5% deficit gap that Italy needs to make up for in order for to get back to where we were a month ago. But to bridge the gap where the commission will accept Italy’s budget proposal, we’re looking at more than a 1.0% deficit gap and there is no way the coalition government will be able to trim that much out of the budget without forgoing its election campaign promises.

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