Italy calls for the separation of defense expenditure from the Stability Pact
In defining the new European budgetary rules, Italy proposes to separate defense expenditure from budget constraints. Facts and insights
The exclusion of defense investments from the Stability Pact, i.e. the EU public finance rules which ratify the ceiling on the deficit and public debt, has been requested.
“Italy does not mind the general structure of the new Stability Pact proposed by the commission. But Rome too is willing to ask for changes and additions to the negotiations that will ignite with the arrival of the legislative proposals: and Italy's requests will inevitably go in the opposite direction to those inspired by German "rigidity"" Il Sole 24 Ore reported today.
If the MEF has in fact considered the reform of the Stability Pact proposed by the Brussels executive to be positive for the debt, at the same time it is asking to keep defense and social spending out of the calculation of the deficit.
“Economics Minister Giancarlo Giorgetti explains it clearly in the introduction to the Def 2023 published yesterday. Italy welcomes the flexible inspiration of a mechanism in which the "objectives are modulated on the basis of the sustainability of the public debt of each member state". To be complete, however, this approach needs additions, adds the Confindustria newspaper.
According to Giorgetti, the list of investments that could fall under the so-called golden rule, ie that can be unbundled from debt for Eurostat purposes, should include "defense spending deriving from commitments undertaken in international fora".
As already invoked in recent months by the Minister of Defence, Guido Crosetto, at European and national level. Because if on the one hand there is the commitment undertaken by Italy to increase spending on defense up to the threshold of 2% of GDP, as a NATO objective, on the other hand the Stability Pact can conflict with compliance with the objectives of the Atlantic Alliance.
NEED TO KEEP OUT EXPENSES FOR MILITARY SUPPORT IN KIEV
So now in the Def, Minister Giorgetti has put in writing that the Government "in the context of the debate on the new European governance in the negotiations is following the line of supporting the adoption of their preferential treatment, first of all, to combat climate change and promote the digital transition (the two pillars of the PNRR), but also for the needs of defense expenditure deriving from commitments undertaken in international fora".
“The theme obviously arises from the financial effort produced by military support for Ukraine” explains Il Sole 24 Ore. But in addition to the current need for assistance to Kiev, the government aims to have room for maneuver for the public investments necessary to reach the NATO defense budget target of 2% of GDP.
THE POSITION OF DEFENSE MINISTER CROSETTO
In fact, our country has specific "problems" in reaching the goal set in 2014 of spending 2% of GDP on defence, also due to the "limits" that EU parameters place on public spending. As Defense Minister Guido Crosetto already pointed out last February, in the NATO ministerial meeting in Brussels.
The question of the exclusion of “defense investments from the Stability Pact has been placed on Europe's table as other countries have done, because at the moment no country can cut defense spending. The help we have given to Ukraine requires us to restore stocks for national defence” Crosetto had already illustrated during communications in joint session to the Defense and Foreign Affairs committees of the Senate in January.
OTHERWISE IT WILL BE DIFFICULT TO REACH THE GOAL OF 2% OF GDP IN DEFENSE EXPENDITURE
During the hearing on the programmatic guidelines at the Chamber Defense and Foreign Affairs and Senate Defense joint commissions last February , the minister recalled that "the decision to allocate 2% of GDP to defense spending was not made by me, it dates back to 2014 and was reaffirmed by all the Governments that followed”.
“I was the only one who said at the NATO meeting that 2% is a difficult target to achieve, given the financial conditions. We are at 1.38%, hence the proposal to separate defense expenditure from budget constraints. Otherwise we will be the "Pierini" of NATO, the only ones not to reach the target of 2% when others are already talking about 3% or 4%” thundered the defense minister.
NOT ONLY DEFENSE IN THE GOLDEN STABILITY PACT
Therefore, the Italian government puts on paper in the Def the proposal for a "preferential treatment for public investments" for defense spending deriving from commitments undertaken in international fora.
Furthermore, as reported by Il Sole 24 Ore , this sort of "golden rule" should then concern what have been defined as the "European common goods", starting, underlines the holder of the Italian accounts, from investments "to combat climate change and promote the digital transition” which, not surprisingly, are “the two pillars of the Pnrr”.
Now the European Commission is working on the legislative proposals which are being negotiated in recent weeks with the Member States with the aim of concluding the legislative work by the end of this year. The reformed Stability Pact will enter into force in 2024.
This is a machine translation from Italian language of a post published on Start Magazine at the URL https://www.startmag.it/economia/litalia-chiede-scorporo-delle-spese-per-la-difesa-dal-patto-di-stabilita/ on Fri, 14 Apr 2023 10:46:39 +0000.