https://www.wsj.com/articles/europes-growth-problem-in-italian-1540336936
There’s little new in the budget battle roiling Rome—but when did that ever stop the European Commission? The mandarins of Brussels on Tuesday issued an unprecedented demand that Italy rewrite its bad budget in line with Brussels’ bad fiscal principles. The tangle contributed to a selloff in global equities.
The Commission wants Rome to deliver a budget deficit equal to no more than 0.8% of GDP next year, a commitment made by the previous Italian government. In theory that discipline should matter to an Italian government whose debt is more than 130% of GDP. But elections have consequences, and one result of the winning coalition of the right-wing League and vaguely left-wing 5-Star Movement is a new budget with a deficit of 2.4% of GDP annually for the next few years.
Other European governments and their taxpayers—and investors—have cause to be wary about parts of the Italian plan. Tens of billions of euros in new spending are slated for welfare handouts and public works that Italy can’t deliver without waste and corruption. None of this will boost economic growth, potentially leaving other eurozone countries to bail out an insolvent Italian state down the road.