Italy Backs Down from Budget Fight with EU

The ruling Five Star Movement and League agree to rein in spending.

Italian labor minister and Five Star Movement leader Luigi Di Maio eyes Prime Minister Giuseppe Conte during a news conference in Rome, July 3
Italian labor minister and Five Star Movement leader Luigi Di Maio eyes Prime Minister Giuseppe Conte during a news conference in Rome, July 3 (Governo Italiano)

The leaders of Italy’s ruling populist parties have backed down from a fight with the European Commission over their 2019 budget.

Luigi Di Maio, the labor minister and leader of the Five Star Movement, and Matteo Salvini, the interior minister and leader of the far-right League, said after a meeting on Sunday that they had given their blessing to Prime Minister Giuseppe Conte’s revised spending plan, which reduces next year’s shortfall from 2.4 to 2 percent of GDP.

Although no details were released, the concession could mean a further dilution of the parties’ signature policies.

  • The Five Star Movement already watered down a universal basic income to a new “citizens’ income” for the poor.
  • The League scaled back its flat tax to a “flat tax” for the self-employed.
  • Both parties want to lower the retirement age from 65-66 to 62 for Italians who have paid pension contributions for at least 38 years.

Economists and politicians from other parties have consistently warned that Italy cannot afford such measures.

The European Commission has refused to sign off on Italy’s budget unless it reins in spending.

It is still not convinced. Last week, Pierre Moscovici, the responsible commissioner, said a reduction in Italy’s deficit to 2 percent was a “step in the right direction, but we are not there yet.”