Global Economic Collapse: EU crisis: Brussels demands France and Italy get public debt under control because of the risk to the Eurozone economy. Video. Add Spain and Belgium to the list. No one is reducing their debt loads. “This is worrying because very high debt levels limit the capacity to respond to economic shocks and market pressures.” 2020, there is that year again!!!
By JOE BARNES, BRUSSELS CORRESPONDENT
PUBLISHED: 15:36, Thu, Nov 21, 2019 | UPDATED: 19:19, Thu, Nov 21, 2019
The European Commission said Paris and Rome had failed to address their mountains of debt despite the good economic conditions. France, Italy, Spain and Belgium are “not expected” to meet the EU’s debt reduction targets, according to Valdis Dombrovskis, the commissioner responsible for the Eurozone. He said: “In 2020, they plan either no meaningful fiscal adjustments or even a fiscal adjustment or even a fiscal expansion.
“This is worrying because very high debt levels limit the capacity to respond to economic shocks and market pressures.”
The four governments were accused of “not taking sufficient advantage of recent declines in interest expenditure in order to reduce their debt ratios”, the Commission said in its review of draft spending plans for Eurozone members next year.
The report said: “Failure to reduce debt may increase the risk of heightened market pressure on countries with high public debt in the future, which could have negative spillover effects on the public debt markets of other euro-area member states.”
Concerns particularly focus on France and Italy because they are the Eurozone’s second and third biggest economies.
Last month Brussels warned Italy’s Giuseppe Conte and France’s Emmanuel Macron that their 2020 spending plans risked “significant deviation” from EU rules.
Rome’s mounting pile of debt, which is forecast at a 136 percent debt to gross domestic product ratio, prompted the Commission’s most stern warning.
“The short term sustainability of Italian public finances appears vulnerable to increases in the cost of debt issuance,” the EU executive said.
Rome’s centre-left coalition government has pledged to keep its deficit stable and implement tax cuts for low earners.
France is forecast to be the only Eurozone country in breach of the EU’s deficit ceiling of three percent of GDP this year.
Finance minister Bruno Le Maire has defend his draft dubdget, which slashes taxes and raises spending.
He branded the move a “political choice” designed to counteract the ailing global economy.
Paris’ debt pile is expected to rise from 98.8 percent of GDP next year to 99.2 percent in 2021.
While the Commission demanded heavily debt-laden countries be more fiscally “prudent”, it encouraged richer member states to boost their spending.
Brussels celebrated Germany and the Netherland’s plans to increase public spending in 2020, but insisted they could both go further.
The Commission said: “Member states with fiscal space are implementing expansionary fiscal policies and should stand ready to continue the use of their fiscal space.”
Both Spain and Belgium were told to submit new budgets to Brussels as soon as their new governments are in place.
The debt warning could prove to difficult for Madrid to avoid with the ruling Socialist Party seeking to form a coalition government with the hard-left Podemos.
Ahead of this month’s general election, both parties campaigned to increase spending.
Their plans clash with the Commission’s demand for Spain’s net primary government expenditure to increase by no more than 0.9 percent in 2020.
Categories: Economic Collapse