'The EU is poised to punish Italy over its “snowballing” spending and borrowing, putting Brussels on a collision course with the populist government in Rome.
In a move expected to raise tensions with Italy, the European commission paved the way for an initial fine of as much as €3.5bn (£3.1bn) on Wednesday after advising the country had met the threshold for disciplinary action.
The commission found the Italian government had failed to make sufficient progress in the past year to reduce its debt, the servicing of which amounted to more than the annual education budget.
The commission’s report said Italy was not expected to meet its debt reduction targets in 2019 or 2020, and an excessive deficit procedure – under which Italy could be forced to hand over 0.2% of its GDP as a deposit to guarantee remedial action – was warranted.
“Italy’s large public debt is a major vulnerability for the Italian economy and decisively reducing it should remain a priority in the best interest of Italy,” the commission said. “Italy’s public debt-to-GDP ratio, at 132.2% in 2018, is the second-largest in the union and one of the largest in the world.”
The report will now be put before member states and the EU’s finance committee for input. It is unlikely a decision on sanctions will be made for many months.
Beyond issuing a warning, the first financial sanction involves a “non-interest bearing deposit” of up to 0.2% of gross domestic product, but the penalties could become steeper if the Italian coalition government fails to change its ways.'
Read more: EU could fine Italy £3billion for breaking spending and borrowing rules
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