The governor of the Bank of Italy, Ignazio Visco warned Italy’s political class not to make the European Commission its enemy. “We would be poorer if we made the European Union an adversary,” Visco said in an address in Rome.
The Italian government is set to respond to a letter from the Commission calling for clarification over the “insufficient progress” made in reducing the national debt.
Deputy Premier Matteo Salvini has said the EU’s budget rules are obsolete and has suggested breaching the 3% deficit limit if this is necessary to boost the economy and create jobs.
The League leader and interior minister is pressing for the government to bring in a two-tier flat tax to give the economy a “positive fiscal shock”. Visco said that increases in public spending or reductions in tax revenues must be brought in in a sustainable way.
He argued increasing the deficit could backfire if this leads to Italy’s bond spread to rise, meaning the cost of servicing the public debt becomes higher.