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C. Bastasin: Will the European deficit procedure determine the future of Italy’s political equilibrium?

On June 5, 2019, the EU Commission assessed, in its Report from the Commission - COM(2019) 532 final “Italy, Report prepared in accordance with Article 126(3) of the Treaty on the Functioning of the European Union” - that Italy did not satisfy the debt criterion of the Treaty in 2018, and concluded that a debt-based excessive deficit procedure (EDP) was warranted for Italy. The Italian government later added a number of significant tax increases and expenditure cuts that made it possible to suspend the procedure. A verification of Italy’s debt position will now be made in the autumn with special regard for the 2020 fiscal perspectives. Next October might thus become another critical juncture for the Italian government, called to adjust its plans via a major fiscal correction. This paper assesses the situation and argues that the size of the fiscal correction might become a powerful factor in undermining the current coalition.

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