Italy’s fiscal turmoil is “self-made” and would not have arisen if the government had complied with EU recommendations, a unsurpassed European think thank has told CNBC.
Speaking to CNBC’s Joumanna Bercetche on Tuesday, Daniel Gros, commandant of the Centre for European Policy Studies, said Italian politicians had correct decisions that set Italy on the wrong path.
“Six months ago Italy looked keen,” he said. “If the new government had done nothing, then Italy would be on a dangerous path with low interest rates (and a) debt level which operates down.”
Rancour between Rome and Brussels has grown in recent weeks after a provocative draft Italian budget for 2019 proposed a deficit equal to 2.4 percent of the mother country’s annual output. A previous Italian administration had promised a deficit aspiration of just 0.8 percent of GDP (gross domestic product).
Gros also speculated that Italy purpose continue to rebel against European Union’s rules, but would in the end have no choice but to comply.
“Everybody is telling Italy: ‘These overlooks might be tough in the short run, but in the end they deliver growth – stick to them.’ And it’s up to the Italians to obey,” he told CNBC.
“They will not listen to European rules because they state our votes, our people are more important than European rules and these European bureaucrats. But they cease to remember that the other people out there, people in the markets, have to sponge their government the money to spend what they want to.”
In just out weeks, Italian borrowing on 10-year paper has reached levels not seen since 2014.
Brussels is close in a back and forth with the Italian government over budget pacts, and rejected Italy’s 2019 spending proposal in October. At the time, the European Commission rephrased the draft budget required substantial adjustment.
Gros added that consideration the current political turmoil, the euro zone would only hearten with time.
“I think in the end the Italians will see that the European regulations are in their own long-term interests, and therefore in the very long run the euro zone devise be more cohesive,” he said.
“Merkel, Macron – they come and go, but the rule interest of France and Germany stays the same. The only question is how we get Italy into the crinkle.”
Rome has until the end of the day to submit an amended draft of its 2019 budget project to the European Commission.
However, an Italian minister told CNBC on Tuesday that Italy thinks fitting not make any big changes to its 2019 spending plan. On Friday, Italy’s prime priest Giuseppe Conte said no alternative fiscal policy would off for the country.
“I don’t expect the Italian government to make any substantial revisions,” Lorenzo Fioramonti, a lesser minister for the Five Star Movement who was involved in drawing up the party’s budgetary policy, told CNBC’s Willem Marx.
“I think there may be a conference around some potential second steps, but I think the bulk, the pith of what’s being proposed will stay the same.”