European Commission Releasing Italy from Excessive Deficit Procedure Oversight
Is the worst over in Italy? Maybe, but there are always some serious risks along the way. 24/7 Wall St. has looked through a document from the European Commission on Wednesday and was surprised to see that the Commission has now recommended that the Council abrogate what is called the Excessive Deficit Procedure. In total, Italy was with Hungary, Latvia, Lithuania and Romania for the same recommendation.
What this translates to is that the period of heightened oversight is beginning to lighten up. Italy's capacity to withstand the impact of financial crisis is still considered to be "hampered by long-standing structural weaknesses." The nation still has high government debt and it has lost external competitiveness. Still, the review on Wednesday said,
Over the past year Italy has adopted a range of relevant and ambitious measures with a view to safeguarding fiscal sustainability and spurring growth. Italy has undertaken action to correct the excessive government deficit, strengthen the budgetary framework, enhance tax compliance, improve the functioning of the labour market and the wage setting framework, foster competition in key sectors of the economy and improve the business environment, including the efficiency of the public administration. These measures go towards meeting the country-specific recommendations issued in 2012 and can contribute to addressing many of the economy's challenges.
However, implementation of the measures taken remains challenging and the reform agenda needs to be taken forward. Delays in the adoption of enacting legislation or incomplete application of legislation are still holding back the potential benefits of several measures.
Some additional points are as follows:
- Italy has taken significant action to bring its deficit in line with the 3% of GDP threshold by end 2012.
- Italy has taken ambitious and wide-ranging policy action to improve its fiscal position and economic growth potential.
- Italy should improve the profitability and efficiency of its banking sector and in particular address non-performing loans.
- Italy needs to shift the tax burden towards consumption, property and the environment to deal with high levels of tax evasion.
- Italy should encourage further competition particularly as regards professional services and local public services.
These are some additional considerations here for the PIIGS. The European Commission has adopted recommendations to the Council with a view to extend the deadlines for correcting the excessive deficit in six countries. These include the nations of Spain, France, the Netherlands, Poland, Portugal and Slovenia. Is Belgium the next hotspot in Europe? The Commission recommended that the Council decides that no effective action has been taken by Belgium to put an end to the excessive deficit and that the Council gives notice to Belgium to take measures to correct the excessive deficit.
Again, this is not an indication that the clouds have parted and that Italy has an all-clear sign. Still, any news is good news when it comes to the oversight of the PIIGS and other troubled spots in the European Union.
Filed under: 24/7 Wall St. Wire, Economy, International Markets Tagged: featured