Daily Management Review

Italy Warned By IMF To Conform To EU Rules On Spending In Its Next Budget


10/10/2018




Italy Warned By IMF To Conform To EU Rules On Spending In Its Next Budget
The opposition of the European Union against the plans of the Italian government to borrow more money for an already heavily indebted economy in its next budget was supported by the International Monetary Fund.
 
A warning was issued to Italy by the Washington-based lender that the government should follow the financial rules and guidelines of the EU or else face the possibility of opposition of investors which could result in a debt default.
 
A budget deficit of 2.4% of the GDP is being targeted by Italy’s populist coalition for next year which is three times of the target set by the previous government. The current government has pledged to spend more even as the debt of the country reaching about 130% of the GDP which is the largest in the eurozone after Greece.
 
The plan of the Italian government to increase its budget deficit has been opposed by the EU.  Budget deficit is the difference between the government income from taxes and the spending by the government.
 
The executive arm of the EU – the EU commission, would review the Italian budget after it is submitted with it by 15 October to ascertain whether the budget is within the guidelines and rules of the EU. The Italian government wants to spend more to spur investment and consumer spending to kickstart economic growth.
 
Given the impending possibility of a trade war and the possibility of a hard Brexit, it is important to uphold the confidence of international money markets, said Maurice Obstfeld, the chief economist at the IMF.
 
And therefore in the current unstable economic climate, it is important for government to abide by the EU regulations that prevent governments from too much borrowings so that the debt to GDP ratio, Obstfeld said.
 
“Our concern about Italy is that there is a real imperative for the fiscal policy to maintain the confidence of markets. And we have seen the [government bond yield] spreads increase over the past months. This has certainly contributed to our downgrade of Italian growth and makes the economy more susceptible to shocks,” he said speaking to reporters in Bali, Indonesia. 
 
“So we think it is important that the government operate within the framework of the European rules, which are also important for the stability of the eurozone itself.”
 
The fact that the Italian government had plans to increase the budget deficit top 2.4 percent next year was confirmed by Italian finance minister, Giovanni Tria, on Tuesday. However the minister said that he wanted to begin “constructive discussions” with the EU and ensure that there is a calm “tone” in the deliberations.
 
“Although so far there hasn’t been an explosion as some feared, we are of course worried,” Tria said. “As a responsible government, we aim to explain the budget and thus guide investors in our meetings in order to calm markets.”
 
(Source:www.theguardian.com)






Science & Technology

WSJ announces imminent start of Boeing 737 MAX flight tests

Study: Machine learning is five times more harmful for the environment than a car

Would Singapore Be The First One To Bring Lab Grown Shrimps To The Global Market?

Apple Patents A ‘Foldable Screen’ For Creating Foldable iPhones

Research Shows Air Pollution Causing Birth Defects

Microsoft tells about operating system of the future

Study: Third of US kids wake up at night to check their smartphones

Deepfake AI Technology Used By Researchers To Bring Mona Lisa ‘To Life'

China is developing technology to capture greenhouse gases

IEA: The growth of renewable energy is slowing

World Politics

World & Politics

Iranian Foreign Minister urges other countries to abandon the dollar

The EC recommends starting penalty procedure against Italy

European Breweries To Up Their Brewing Innovation Amid Green Legislations

‘Frequent’ Shootings Causes China To Issue Travel Advisory Against US To Its Citizens

Facebook’s appeal to stop ECJ data case rejected in Irish Supreme Court

Trump: Japan to buy 105 F-35 fighters from the USA

Theresa May to resign on June 7

The Earth Is ‘Not On Track’ To Tackle Global Warming: The U.N. Secretary General