EU CIVIL WAR: Emmanuel Macron’s finance measures spark COLLISION between Italy and EU

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The French President’s latest attempt to quash the Yellow Vest movement, which has been gripping the Government for months, will likely infuriate the eurosceptic Lega-Five Star Movement’s coalition in Rome, an economist said. Mr Macron has announced a series of economic manoeuvres to decrease social tensions within the country, including income tax cuts totalling (€5bn) and more support to single parents. He also promised no schools or hospitals will be closed until 2022 and said worker bonuses of up to (€1,000) won’t be taxed. 

But these measures are expected to further increase the country’s fiscal deficit which, according to analysts at Berenberg Bank, could peak to 3.2 percent this year.

This would make France breach the EU’s deficit threshold of 3 percent, and enrage Italy’s Government who has been at odds with the Commission over spending since last summer.

Florian Hense, economist at Berenberg, told CNBC when asked if Rome is likely to use the French situation to accuse Brussels of double standards: “That is as sure as eggs is eggs. 

“The Italian government has done it before and will do it again.”

Italy’s two deputy prime minister, anti-immigration leader Matteo Salvini and eurosceptic Luigi Di Maio, decided to raise the target to 2.4 percent of the country’s GDP in mid-2018, just weeks after swearing in on June 1, to pay for the hefty reforms promised during the electoral campaign.

This target didn’t exceed the EU’s 3 percent cap but was three times bigger than the budget previously drafted by the former centre-left Government, which raised concerns across the continent it would make Italy run even more into debts. 

Italy has the second highest pile of public debt in the euro zone at about 130 percent of GDP. 

The new spending target triggered a reaction in Brussels, with the Commission first urging Rome to scale back and then issuing an official warning to the country.

Italy eventually caved in, drastically reducing its deficit target to 2.04 percent of its GDP. 

But Mr Salvini accused the Commission in December of having treated France and Italy differently, despite Paris also breaching European fiscal rules and exceeding multiple time the 3 percent target.

But the Commission believes the state of the finances in Rome and Paris are not comparable.

Italy tipped into recession at the end of 2018, with its economy shrinking by 0.2 percent after a 0.1 percent decline in the third quarter of last year.    

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