(Bloomberg) -- European officials warned Italy’s populist government that mere verbal reassurances are no longer enough to stave off an infringement procedure for its excessive debt.
The government “will require substantial correction of Italy’s fiscal trajectory,” European Commission Vice President Valdis Dombrovskis said on Thursday in Luxembourg. He is set to meet with Italian Finance Minister Giovanni Tria, who reiterated that extra budget measures won’t be necessary as incoming data show Italy will respect its budget commitments.
“We are negotiating,” Tria said before a meeting of euro-area finance ministers. “We will show that we will reach our goals, which put us in a safe situation.”
On Tuesday, European Union finance deputies agreed with the commission that Italy isn’t keeping its promise to bring down debt and that a formal censure is warranted. The EU’s executive arm could propose the formal opening of the process in as soon as a few weeks.
“It’s quite important to clarify all the political decisions that are needed needed to bring Italy to comply” with its commitments, Eurogroup President Mario Centeno said. “We need to reassure everyone, Italian citizens first and European investors, that the commitment is there and if we deliver on those commitments the outcome will be much better for Italy.”
However, there is still room for a compromise and the Italian government is confident that an all-out confrontation will be averted.
Finance ministers “stand ready to take into account additional elements which Italy would put forward,” Dombrovskis said.
The disciplining process could lead to initial fines of up to 0.2% of gross domestic product -- or 3.5 billion euros ($4 billion). As part of the process, the commission will have to set out a so-called adjustment path for Italy’s debt, outlining the debt reduction required and the time-frame within which the government in Rome would need to achieve that.
“It’s of course the hope of all of us that this a process that can reach a constructive conclusion,” Irish Finance Minister Pascal Donohoe said on his way into the meeting.
