Italian populists and the Pact

2021 ◽  
pp. 127-148
Author(s):  
Frédéric Mérand
Keyword(s):  
Public Debt ◽  
Political Crisis ◽  
Coalition Government ◽  
Stability And Growth Pact ◽  
The Third ◽  
Growth Pact ◽  
Italian Case ◽  
Five Star Movement ◽  
The Stability

Still on the Stability and Growth Pact, this chapter focuses on the Italian case, the third largest economy in the eurozone. After years of trying to find with Matteo Renzi’s Democrats a “narrow path” that would allow Italy to reduce its public debt, relations between the commissioner and Italy turn into an open political crisis when the Lega–Five Star Movement coalition government comes to power and decides to openly flout budgetary rules. After the Greek summer of 2015, the Italian autumn of 2018 is the most dramatic moment in the cabinet’s life. The chapter explains why, despite Rome’s growing isolation, the Commission ended up not sanctioning Italy.

scholarly journals Is debt restructuring needed to make the Stability and Growth Pact (more) credible?

2011 ◽  
Vol 59 (2) ◽  
pp. 155-164
Author(s):  
Jens Körner
Keyword(s):  
Interest Rates ◽  
Monetary Union ◽  
Public Debt ◽  
European Monetary Union ◽  
Stability And Growth Pact ◽  
European Monetary ◽  
Debt Restructuring ◽  
Growth Pact ◽  
Starting Point ◽  
The Stability

The emergence of the so-called PIIGS crisis which in 2009 became acute due to strongly diverging risk premiums, marked the beginning of a new phase for the European Monetary Union. Whilst the run-up to EMU had been characterized by an encouraging convergence of macroeconomic fundamentals of its member countries, it is now facing a serious threat in particular due to excessive levels of public debt. In 1997, the Stability and Growth Pact introduced a mechanism designed to prevent excessive public debt of the type currently observed; the fact of the matter, however, seems to be that levels of public debt has continuously grown from one economic cycle to the next. But the SGP apparently not only failed to fulfil its aim to keep the deficit and the debt level within its limits but also suffered from a severe loss of credibility; unless some profound action is taken it may further diminish, severely hampering the loose structure of the European Monetary Union. In order to regain some credibility, mitigate financial market’s concerns and, hence, lower borrowing cost, a consolidation path is needed to returns to acceptable levels of debt in the foreseeable future. This process has already started and measures have been taken by several eurozone countries to speed up fiscal consolidation. The aim of the paper is to analyze whether or not the group of the PIIGS countries are likely to return to debt levels in accordance with the SGP criteria or if it might be necessary to undergo a process of debt restructuring or default. By analysing different scenarios where nominal interest rates on debt (r) and nominal growth rates (n) as well as gaps thereof (r-n), herein called the automatic debt dynamics, are varied, this paper comes to the conclusion, that debt restructuring or default is a likely outcome for some of the PIIGS; arithmetics is in particular playing against Greece. As disillusioning and disappointing this outcome might be for some observers, it could be the starting point for a more credible set of rules for the SGP, which the author deems to remain a crucial component in any institutional set-up within the eurozone.

EDP could bring about a Rome-Brussels agreement

2018 ◽  
Keyword(s):  
Public Debt ◽  
Budget Deficit ◽  
Stability And Growth Pact ◽  
Content Type ◽  
Fast Tracking ◽  
Growth Pact ◽  
Target Set ◽  
The Stability

Significance The Commission recommended an EDP on November 21, on the grounds that Italy was in violation of the debt-reduction target set by the Stability and Growth Pact. This is the first step in a long procedure that could end with sanctions on Italy. Impacts Correcting excessive public debt will require tougher measures than fixing an excessive budget deficit and will be a much longer process. An aggressive move towards fast-tracking sanctions could bolster the Italian government’s anti-EU rhetoric ahead of the 2019 EP elections. If France's new economic measures do not end in a procedure against the Macron government, it may boost Rome's anti-EU sentiment.

scholarly journals Strategic Debt Management within the Stability and Growth Pact

2010 ◽  
Vol 61 (3) ◽  
Author(s):  
Gernot Sieg ◽  
Ulrike Stegemann
Keyword(s):  
Public Service ◽  
Public Debt ◽  
Private Information ◽  
Lower Cost ◽  
Debt Management ◽  
Stability And Growth Pact ◽  
Growth Pact ◽  
Balanced Budget ◽  
The Stability

SummaryOpportunistic politicians use the composition of public debt as a signal for competence. A competent government will not issue long-term nominal debt, as optimal to balance the budget, but long-term inflation-indexed debt. We consider politicians that pursue the objective of a balanced budget subject to the Stability and Growth Pact and reelection. A government’s competence is reflected by its ability to produce a public service at a lower cost (taxes). Competence is private information of politicians.

Braucht die EU einen flexibleren Stabilitätspakt?

2004 ◽  
Vol 53 (1) ◽  
Author(s):  
Carsten Hefeker ◽  
Friedrich Heinemann ◽  
Klaus F. Zimmermann
Keyword(s):  
Public Awareness ◽  
Time Lag ◽  
Fiscal Rules ◽  
External Control ◽  
Public Expenditures ◽  
Stability And Growth Pact ◽  
Consolidation Process ◽  
Growth Pact ◽  
Long Run ◽  
The Stability

AbstractIn his contribution Carsten Hefeker points out that most of the official arguments concerning the necessity of the Stability and Growth Pact are not convincing. Nevertheless, a mechanism that credibly avoids excessive debts and deficits is needed in most member states. It would be more useful, however, if such rules would focus on overall debt rather than on deficits. In addition, he advocates to create an external control for such fiscal rules, independent from the Commission and ECOFIN. He concludes that the Pact does not need to become more flexible, but more credible.Friedrich Heinemann states that much of the recent reform debate on the Stability Pact is based on a fundamental misconception: The Pact has not been established as a guiding tool for welfare - maximising politicians, but in order to limit detrimental incentives from fiscal short-sightedness. “Stupid” elements like the three-per-cent deficit ceiling have a clear and beneficial strategic function as boundary within the national budgetary process. Furthermore, simple rules are superior to smart ones in increasing the political costs of high deficits in terms of public awareness. The critique on the pact′s missing flexibility is correct mainly regarding its lose logical link to long-run sustainability. Increasing flexibility in a cyclical sense, however, is not a reform priority. Already today the Pact leaves sufficient leeway for responsible politicians. Instead, the reform focus must be on depoliticising the pact in the sense of limiting Council power in the deficit procedure. More flexibility must not come without depoliticising. He recommends that any reform should only be carried into effect with a significant time lag in order to limit the reputation damage which would be the consequence of any quick institutional response to the Pact′s recent crisis.In his paper Klaus F. Zimmermann argues that the Stability and Growth Pact (SGP) has been subject to criticism ever since its inception. He points out that it overlooks business cycle developments within the framework of the consolidation process; it adopts a too short-term view of the stabilisation target which is also hardly under control of policy-makers; and it deals with policy imperfections in a sub-optimal way. Therefore, a reform of the SGP is urgent. The author suggests that the rules must be handled more flexibly. In his opinion, a mediumterm budgetary target and a focus on public expenditures to tackle the pro-cyclical bias is needed. To restore credibility, the task of supervision should be transferred to an independent European institution.

THE EUROPEAN UNION AND ITALY RELATIONS IN THE CONTEXT OF SUPRANATIONAL FISCAL REGULATION

2021 ◽  
pp. 208-221
Author(s):  
Dmitrii О. Mikhalev ◽  
◽  
Egor’ A. Sergeev ◽  
Keyword(s):  
European Union ◽  
Budget Deficit ◽  
Stability And Growth Pact ◽  
The European Union ◽  
Internal Factors ◽  
Growth Pact ◽  
Discretionary Fiscal Policy ◽  
The Government ◽  
The Stability ◽  
The Eu

The article presents a retrospective analysis of relations between the government of Italy and the European Union institutions in the context of supranational fiscal regulation in 2002–2019. The authors analyze the influence of external and internal factors on the state of public finance in Italy, note the reasons that made it difficult to meet the requirements of the Stability and Growth Pact, study the main issues on the agenda in the EU-Italy relations and their evolution. The authors also come to conclusion that unlike the earlier discussions about correcting budget deficit in Italy, current focus of supranational fiscal governance is shifted to preventing it, what challenges the economic sovereignty of Italy and country’s opportunities to conduct a discretionary fiscal policy.

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