S5 Ep7: Director’s Cut: The Italian government budget proposal for 2019

Guntram Wolff welcomes Bruegel affiliate fellow Silvia Merler to
evaluate the Italian government’s planned budget for 2019, in
this Director’s Cut of ‘The Sound of Economics’


Six months after its election, Italy’s coalition government
reached an agreement on public spending.


The key tenets of its first budget include a spending increase
that will drive the budget deficit to 2.4% of GDP, tax cuts, a
proposal for a minimal income for the unemployed, as well as
cancellation of the plans to increase retirement ages.


Though the new deficit budget fits into the EU’s limit of 3%,
Italy’s debt of €2.3 trillion makes for a difficult case to
increase spending. The news comes as a blow for the finance
minister Giovanni Tria, who pushed for a more fiscally
responsible budget, trying to limit budget deficit to 1.6% of
GDP. The decision also received disapproval from Brussels, with
EU Economics Commissioner Pierre Moscovici criticising Italy for
“flouting the rules” and disregarding its large debt. 


To discuss the potential consequences, Guntram Wolff welcomes
Bruegel affiliate fellow Silvia Merler to this Director’s Cut of
‘The Sound of Economics’.


For further reading, we recommend Guntram Wolff’s opinion piece
on how to overcome the hurdles obstructing Italian growth, as
well as Silvia Merler’s note comparing the capital flight from
Italy in 2018 with similar such scenarios witnessed in 2011 and
2016.