FROM EIR DAILY ALERT
Italian Development Undersecretary Geraci Insists We Don’t Want To Suffer Like Greece
Nov. 14, 2018 (EIRNS)— Italian Undersecretary for Economic Development Michele Geraci is in London, where he was interviewed by the BBC yesterday and by CNBC this morning. To CNBC he stressed that Italy is planning a budget deficit which is far below the 3% ceiling dictated as a limit for the euro area by the Maastricht Treaty. That treaty, which was incorporated in the EU Treaty, makes that ceiling independent from the debt level: Be the debt lower or higher, the deficit limit is always 3%.
With that, Geraci implicitly meant that Italy is disregarding the “Stability and Growth Pact,” which was signed later and which is not part of EU Law, but it is an “intergovernmental agreement.” The SGP mandates a tendentially zero deficit for “indebted” countries.
Italy has a primary surplus, i.e., a budget surplus if debt service is not considered. “This is a rare case. There are not many countries which have a primary surplus,” Geraci remarked. The Italian government is confident that, once investors realize that the government is not implementing any weird measures, but aims at growth with conventional measures, the yield on Italian bonds will go down.
In the interview with BBC yesterday, Geraci said that the Italian response to the EU request to change its budget plan will be “No.”
Yesterday was the deadline for the answer. BBC asked Geraci what is going to happen. “Not much,” Geraci answered.
“We’ll send back our plan, which won’t be revised in any substantial manner. We do believe that under the current economic situation in Italy we need to spend, and it has been proven, I believe, in the last few years, that, indeed, austerity does not help and we need to go into a deficit.”
What about the taxpayers in Greece, Spain, Ireland? All of them had to suffer under harsh austerity. Why should Italy be different?
“Because they suffered! And we do not want to repeat those mistakes made in 2010-2011 with Greece and some other countries. We have a problem that in the last 20 years our productivity has not grown and our GDP is back to the levels of 1999; so, in the last 20 years the standard of living of the average population has not improved and we need to make drastic changes. For the first time we are taking the risk of taking daring measures that try to bring benefits for the long term.”