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Could Sanctions against Italy Be Imposed Earlier than Expected?

Cohen-Setton J.and Leandro A., (2018), “Could Sanctions against Italy Be Imposed Earlier than Expected?”, Peterson Institute for International Economics, 30 Οκτωβρίου

Ιtaly may soon find that time is running out if it wants to escape swift punishment for violating the European Union’s tough rules against excessive budget deficits.[1] The nation’s debt-to-GDP ratio of more than 130 percent is well above the EU debt limit of 60 percent. In the past, Italy was spared the EU’s Excessive Deficit Procedure (EDP) because it promised to improve its fiscal balance over time. But with the new budget plan to reverse fiscal consolidation and implement a fiscal expansion of 0.8 percent of GDP, the presumption that it would do what was necessary to respect the requirements of the preventive arm of the EU’s Stability and Growth Pact (SGP) has vanished.

Rather than having to wait for April 2019 to launch an EDP and another half-year for sanctions, as is commonly argued (see, for example, The Economist), the standoff between the European Commission and Italy could happen much earlier. The European Commission not only can recommend launching the EDP within the next three weeks but also at the same time could impose a sanction in the form of a non-interest-bearing deposit of up to 0.2 percent of GDP to be lodged with the Commission.

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