Recommendation for a COUNCIL DECISION abrogating Decision 2010/286/EU on the existence of an excessive deficit in Italy
Date: 2013-05-29
Institutions: European Commission
Subjects: Italy, budget deficit, budgetary equilibrium, labour market, stability pact, tax reform

EUROPEAN 
COMMISSION 

Brussels, 29.5.2013  
COM(2013) 385 final 

Recommendation for a 

COUNCIL DECISION 

abrogating Decision 2010/286/EU on the existence of an excessive deficit in Italy 

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Recommendation for a 

COUNCIL DECISION 

abrogating Decision 2010/286/EU on the existence of an excessive deficit in Italy 

THE COUNCIL OF THE EUROPEAN UNION, 

Having  regard  to  the  Treaty  on  the  Functioning  of  the  European  Union,  and  in  particular 
Article 126(12) thereof, 

Having regard to the recommendation from the Commission, 

Whereas:  

(1) 

(2) 

(3) 

By  Council  Decision  2010/286/EU  of  2  December  20091, 
following  a 
recommendation from the Commission, it was decided that an excessive deficit existed 
in Italy. The Council noted that the general government deficit planned for 2009 was 
5.3%  of  GDP,  thus  above  the  3%  of  GDP  Treaty  reference  value,  while  the  general 
government gross debt was planned to reach 115.1% of GDP in 2009, thus above the 
60% of GDP Treaty reference value2. 

On  2  December  2009,  in  accordance  with  Article 126(7)  TFEU  and  Article  3(4)  of 
Council Regulation (EC) No 1467/97 of 7 July 1997 on speeding up and clarifying the 
implementation  of  the  excessive  deficit  procedure3,  the  Council,  based  on  a 
recommendation  from  the  Commission,  addressed  a  recommendation  to  Italy  with  a 
view  to  bringing  the  excessive  deficit  situation  to  an  end  by  2012  at  the  latest.  The 
recommendation was made public. 

In  accordance  with  Article  4  of  the  Protocol  on  the  excessive  deficit  procedure 
annexed to the Treaties, the Commission provides the data for the implementation of 
the procedure. As part of the application of this Protocol, Member States are to notify 
data  on  government  deficits  and  debt  and  other  associated  variables  twice  a  year, 
namely before 1 April and before 1 October, in accordance with Article 3 of Council 
Regulation (EC) No 479/2009 of 25 May 2009 on the application of the Protocol on 

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2 

3 

OJ L 125, 21.5.2010, p. 40. 
The  general  government  deficit  and  debt  for 2009 were  subsequently  revised  to 5.5%  and 116.4%  of 
GDP respectively. 
OJ L 209, 2.8.1997, p. 6.  

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the  excessive  deficit  procedure  annexed  to  the  Treaty  establishing  the  European 
Community4.  

(4)  When considering whether a decision on the existence of an excessive deficit should 
be  abrogated,  the  Council  should  take  a  decision  on  the  basis  of  notified  data. 
Moreover, a decision on the existence of an excessive deficit should be abrogated only 
if  the  Commission  forecasts  indicate  that the  deficit  will  not  exceed  the  3%  of  GDP 
threshold over the forecast horizon5. 

(5) 

Based on data provided by the Commission (Eurostat) in accordance with Article 14 
of  Regulation  (EC)  No  479/2009  following  the  notification  by  Italy  before  1 April 
2013, the 2013 Stability Programme, the Commission services’ 2013 spring forecast, 
and the assessment of additional measures adopted in decree-law 54 of 21 May 2013, 
the following conclusions are warranted: 

– 

– 

– 

After peaking at 5.5% of GDP in 2009, Italy's general government deficit was 
steadily  brought  down  and  reached  3.0%  of  GDP  in  2012,  which  was  the 
deadline set by the Council. The improvement was driven by significant fiscal 
consolidation,  while  in  2012  interest  expenditure  was  0.8 pp.  of  GDP  higher 
than in 2009 and the composition of economic activity was tax poorer. 

The stability programme for 2013-17, adopted by the Italian government on 10 
April 2013 and endorsed by parliament on 7 May, plans the deficit to decline 
slightly to 2.9% of GDP in 2013 and then fall to 1.8% of GDP in 2014. Based 
on  the  no-policy-change  assumption,  the  Commission  services'  2013  Spring 
forecast projects a deficit of 2.9% of GDP in 2013 and, 2.5% of GDP in 2014. 
Both  the  stability  programme  and  the  Spring  forecast  include  the  impact  of 
decree-law 35 of 8 April 2013, which provides for the settlement of trade debt 
arrears  owed  by  the  general  government  sector  to  private  suppliers,  for  an 
overall  amount  of  EUR 40  billion  (or  around  2.5%  of  GDP)  over  2013-14. 
While  this  amount  translates  into  a  corresponding  increase  of  the  general 
government debt, it affects the deficit only for the part that is related to capital 
expenditure. The decree law sets these payments at 0.5% of GDP in 2013, with 
a corresponding increase in the deficit. It also includes a safeguard clause that 
authorises  the  government  to  delay  the  settlement  of  deficit-increasing  trade 
debt  arrears  or  adopt  other  corrective  measures,  in  order  to  ensure  the 
achievement of the 2013 budgetary target.  

The Italian Parliament formally endorsed the budgetary objectives put forward 
in  the  2013  stability  programme  on  7  May.  On  17  May,  i.e.  after  the  Spring 
forecast,  the  new  governmment  issued  a  formal  declaration  to  confirm  these 
commitments and announce the adoption of new measures in the full respect of 
the budgetary objectives in the stability programme. Decree-law 54, adopted on 
the same date, spells out the new measures. These include:  

4 
5 

OJ L 145, 10.6.2009, p. 1.  
In line with the “Specifications on the implementation of the Stability and Growth Pact and Guidelines 
on the format and content of Stability and Convergence Programmes” of 3 September 2012. See: 
http://ec.europa.eu/economy_finance/economic_governance/sgp/pdf/coc/code_of_conduct_en.pdf  

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– 

– 

the  June 

the  property 

instalment  of 

the  suspension  of 
tax  on 
owner-occupied  houses  –  excluding  luxury  residences  –  as  well  as 
agricultural  property,  while  committing  the  government  to  an  overall 
redesign  of  the  legislation  on  real  estate  taxation.  A  safeguard  clause 
ensures  that  the  redesign  has  to  be  made  in  the  full  respect  of  the 
budgetary targets in primary terms; furthermore, if the budgetary-neutral 
reform  fails  to  be  approved  by  the  end  of  August  2013,  the  suspended 
property tax instalment will have to be paid by 16 September.  

the  extension  of  the  wage  supplementation  scheme  to  workers  not 
already  covered  for  the  year  2013,  by  reallocating  available  budgetary 
resources  over  and  above  those  set  aside  with  the  2012  labour-market 
reform.  

– 

– 

– 

Overall, the new provisions are assessed  to have no significant impact on the 
deficit,  if  consistently  implemented.  Therefore,  the  deficit  is  set  to  remain 
below the reference value of 3% of GDP in a durable way.  

After improving by nearly 2¾ pps. of GDP in cumulative terms between 2009 
and 2012, the structural balance, i.e. adjusted for the economic cycle and net of 
one-off and other temporary measures, is forecast to further improve by nearly 
1 pp. in 2013 (to around -½% of GDP) and worsen slightly in 2014, based on a 
no-policy-change assumption. 

The debt-to-GDP ratio rose by 10.6 percentage points between 2009 and 2012, 
to 127.0%, also due to Italy's contribution to financial assistance to Euro Area 
Member States. As cyclical conditions remain negative, the gross government 
debt is forecast to increase to 131.4% of GDP in 2013 and 132.2% in 2014 also 
due to the 2.5 pps. of GDP settlement of trade debt arrears planned over 2013-
14. 

(6) 

(7) 

(8) 

The Council recalls that, starting in 2013, which is the year following the correction of 
the  excessive  deficit,  Italy  should  progress  towards  its  medium-term  objective  at  an 
appropriate pace, including respecting the expenditure benchmark, and make sufficient 
progress towards compliance with the debt criterion in accordance with Article 2(1a) 
of  Council  Regulation  (EC)  1467/97  of  July  1997  on  speeding  up  and  clarifying  the 
implementation of the excessive deficit procedure. 

In accordance with Article 126(12) of the Treaty, a Council Decision on the existence 
of  an  excessive  deficit  is  to  be  abrogated  when  the  excessive  deficit  in  the  Member 
State concerned has, in the view of the Council, been corrected.  

In  the  view  of  the  Council,  the  excessive  deficit  in  Italy  has  been  corrected  and 
Decision 2010/286/EU should therefore be abrogated, 

HAS ADOPTED THIS DECISION: 

From  an  overall  assessment  it  follows  that  the  excessive  deficit  situation  in  Italy  has  been 
corrected. 

Article 1 

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Decision 2010/286/EU is hereby abrogated. 

Article 2 

Article 3 

This Decision is addressed to the Italian Republic. 

Done at Brussels,  

For the Council 
The President 

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