Photographer: Marc Hill/Bloomberg

Italy Wants the EU to Change Tack on Growth and Security

  • Junior minister Gozi urges longer Juncker investment plan
  • Gozi calls for “more expansionary economic policy” in Europe

Italy is seeking an expansionary push for growth in the European Union as the bloc forges a new course after the U.K. voted to leave, Prime Minister Matteo Renzi’s junior minister for European affairs said.

Undersecretary Sandro Gozi, speaking ahead of an Aug. 22 informal meeting of Renzi, German Chancellor Angela Merkel and French President Francois Hollande, called for a wide-ranging agreement to boost cooperation on security and defense as well as an expansionary economic policy to boost European growth.

Sandro Gozi

Photographer: Gabriel Bouys/AFP via Getty Images

“We need to increase and reinforce EU action on security and defense, including rapidly launching the European policing of its external borders,” Gozi said in a telephone interview. “Also as a reply to the terrorist threat, some EU countries should be able to work on joint initiatives in the security, policing or military fields if they wish to do so.”

In the wake of the Brexit referendum, and with the Italian economy unexpectedly stalling in the second quarter, Renzi has stepped up calls for a departure from what his government sees as German-inspired austerity policies. Renzi is preparing for a referendum on constitutional reform, expected to take place in November, on which he has staked his political future.

Expansionary Policy

“We seek a different, more expansionary economic policy at the European level,” Gozi said. “On this there is agreement with the French. There is work to be done with the Germans.”

Gozi said the investment plan of European Commission President Jean-Claude Juncker, which runs to the end of 2017, should be extended to 2019 and should include more cross-border projects possibly involving the digital sector and infrastructure. Gozi also called for measures to tackle youth unemployment, and for the EU to do more to ensure the repatriation of migrants.

Across the euro area, policy makers have been intensifying rhetoric that its governments need to boost fiscal support and structural reforms. European Central Bank President Mario Draghi said in July that “other actors” should now play their part.

Italy is expected to seek a green light from the European Commission for a deficit-to-gross domestic product ratio of more than 2 percent to allow for an expansionary budget in 2017, instead of reducing it to 1.8 percent as previously agreed.

Flexibility Premature

Gozi said he didn’t anticipate budget flexibility will be discussed at the informal summit, on the island of Ventotene west of Naples, and expects to have indications on macro-economic targets in late September.

“The economic slowdown is a general European one, it’s not just Italian, there isn’t an Italian exception and Italy doesn’t ask for exceptions,” Gozi said. “Italy respects existing rules for the budget, and flexibility is among those rules. So drawing up the 2017 budget means applying those rules, reducing debt and the structural deficit, and applying flexibility.”

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