EU executive OK's 2020 eurozone budget plans despite high debt

The 2020 draft budget plans of the 19 eurozone countries have been given the go-ahead by the European Commission, despite ‘risks of non-compliance’ on rules limiting public debt in Italy, France, Belgium and Spain.

These four countries have not sufficiently used favourable economic times to put their public finances in order, commission Vice President Valdis Dombrovskis said on Wednesday in Brussels.

This group plus a further four eurozone members - Portugal, Slovenia, Slovakia and Finland - also risked breaching the European Union's Stability and Growth pact, the commission said in a statement.

Under the pact, eurozone countries should keep their deficit within 3 per cent of gross domestic product (GDP) and limit public debt to no more than 60 per cent of GDP. They are also obliged to whittle down excess debt annually.

These states were urged to rectify the deviations, but the risks identified by the commission were not deemed serious enough to prevent the budgets being signed off.

On the other end of the spectrum, the executive welcomed plans to increase public spending in Germany and the Netherlands next year.

Both countries should strive to make the most of their ‘fiscal space,’ although they had heeded calls to spend more last year, the commission noted.

Questions about Italy's budgetary plans had been raised before the verdicts were presented on Wednesday.

Twelve months ago, Italy was in trouble with the EU for budget plans lambasted by Brussels as an ‘unprecedented’ deviation from eurozone budget rules.

At the time, Rome's dominant political figure was far-right deputy premier and interior minister Matteo Salvini, a man who relished picking fights with the EU establishment.

Italy's new centre-left government plans a public debt increase to 135.7 per cent of GDP this year, and a slight fall to 135.2 per cent for 2020.

Along with Italy, France had also been asked by the EU to defend its budget plans for 2020 after Paris made the choice to lower taxes in a period of economic slowdown in a bid to assuage ‘Yellow Vest’ protesters.