LONDON - Anna Maria Bianchi, a 62-year-old nurse who could have retired this year had it not been for pension reforms introduced by Italy’s previous government, agrees with Deputy Prime Minister Matteo Salvini that Brussels should mind its own business.
She says, “I have worked for more than 40 years. Isn’t that enough?” She can see no logic in her working life being extended by three years, when there are newly qualified young nurses unable to get jobs and eager to take her place.
Like many older voters in the region of Lazio, formerly a heartland of the Democratic Party (PD), she voted earlier this year in parliamentary elections for the Five Star Movement (M5S), one of the political outsiders that have upended Italian politics and are now set to defy the European Union.
At issue is the 2019 budget plan put forth by Italy's populist coalition, which comprises M5S and the nationalist Lega party. Bianchi is not alone in hoping the government remains steadfast in a looming showdown with Brussels.
The budget would undo the pension reforms and allow her to retire. It would also give unemployed Italians a basic guaranteed income, tied to re-training and job-hunting requirements.
EU commissioners are demanding the big spending budget be rewritten, saying that otherwise Italy’s debt burden will plunge the euro zone into a financial crisis.
The government was to deliver a letter Tuesday to the European Commission, rejecting EU demands for the budget to be amended, defying the threat of financial sanctions.
Italy’s proposed budget, which has roiled financial markets, breaks EU fiscal rules aimed at reducing public debt in the bloc’s countries.
“The only way to respect European rules is to pass a suicidal budget that would take us into recession,” said Luigi Di Maio, Italy’s deputy prime minister and leader of M5S. Italy’s public debt stands at more than 130 percent of GDP, the second-highest ratio in the eurozone after Greece.
Last month, the European Commission rejected Italy's draft spending plan, saying it amounted to an “unprecedented” deviation from eurozone rules; but, Di Maio and Lega leader Matteo Salvini say their anti-austerity approach will kickstart growth in the eurozone's third largest economy, thereby reducing the country’s public debt and the government’s deficit.
Italian Prime Minister Giuseppe Conte says the EU Commission is undervaluing “the positive impact of the budget and structural reforms.”
Salvini has told “the gentlemen of Brussels” to “let us work, live and breathe,” a sentiment that’s proving highly popular among Italians who are increasingly despairing of the impact of austerity economics.
On average, Italians are no richer than they were two decades ago, unemployment is running at 10 percent, and one in Italians lives on less than $11,500 (10,000 euros) a year. The number of Italians in absolute poverty has tripled in 10 years.
The government plans to run a public deficit of 2.4 percent of GDP in 2019 to pay for the welfare reforms, tax cuts and pension reforms. Brussels estimates that by 2020, Italy's deficit will breach 3 percent of GDP, the EU maximum, and it rejects the idea the giveaway budget will stimulate growth.
That view is shared by many economists, who warn Italy’s coalition government is being overly optimistic. They say nervous investors will start dumping Italian bonds, making it more expensive for the government to borrow on financial markets, forcing higher interest rates for the wider economy. The higher cost of borrowing means more of the Italian government’s income would go to servicing public debt, straining resources and undermining the economic growth the government is banking on, pushing the country into a dangerous spiral.
Economists criticize the government for not grappling with what they say are the factors behind Italy’s weak economic performance for decades - low productivity and burdensome regulations that increase business costs.
The International Monetary Fund recently reported that government-protected national wage bargaining by Italy’s organized labor is hurting the labor market. It calculated that shifting to company-level wage bargaining would reduce unemployment by 4 percent.
If the EU commission rejects Italy’s budget plan again, it can start legal action and ask members to approve a timetable for compliance. If non-compliance continues, the bloc could impose fines of up to 0.2 percent of GDP or cuts in EU regional subsidies.