Analysis. As Europe sorted the implications of Italy’s referendum vote, one thing was certain: The finance ministers aren’t cutting Rome any breaks.

Eurogroup: no discounts for Italy post-referendum

The day after the result of the Italian referendum, the Eurogroup summit said that Italy must take “the necessary steps to observe the Stability Pact in 2017.” For the group of Europe’s finance ministers, now more than ever, “the operation is at risk” and will require “significant additional measures.” To sweeten the pill, the president of the Eurogroup, Jeroen Dijsselbloem, said “it is impossible to demand any corrective actions now. We have to wait for the next government.”

The Commission had reached out to Italian Prime Minister Matteo Renzi, freezing the analysis of the Italian budget which was postponed to the beginning of next year. However, this gesture did not influence the referendum, which had a result that many now interpret as anti-E.U.

The absence of Italy’s Finance Minister Pier Carlo Padoan at the Eurogroup meeting (he was replaced by the director of the Treasury) did not help to clear the air (although the Italian minister made phone calls to his colleagues). Thus, the counter is reset to zero, with the possibility of the application of a €5 billion correction, while maintaining “a smaller but still significant departure from the adjustments,” as indicated by Dijsselbloem, due to higher costs for assisting refugees and earthquake-affected areas.

The problem is that the other countries also have elections ahead and must take into account the will of their voters. German Finance Minister Wolfgang Shaüble is particularly concerned about the stability of Italian banks. “There is an urgent need for a government” in Italy, he said, adding that “there is no reason to fear a euro crisis after the referendum” (although in the hours that followed the result, the currency dipped).

On Monday, they all unanimously repeated the words of a European Commission spokesman: “The referendum is not a threat to the stability of the E.U., but reforms must continue.” According to the Commissioner for Economic Affairs Pierre Moscovici, Italy “is a solid country with strong institutions, and I have complete confidence in its ability to deal with the situation.” The French Finance Minister Michel Sapin is convinced that there is “no systemic risk in Italy.”

But for the E.U. finance ministers, the high level of Italian debt (133 percent of GDP) “remains a cause for concern.” So, the demands for privatization keep coming, in hopes Italy will use the proceeds to respect the Stability Pact. The widespread fear of bank failures continues. Seven are in serious trouble; they need recapitalization, but the climate of uncertainty actually scares funding away.

In this climate, the Eurogroup has rejected the Commission’s proposal for the expansion of the budget. The project should involve the countries that currently have balanced or surplus budgets, like Germany and the Netherlands, but both countries have elections in 2017. The Commission had calculated an increase of around €50 billion, a budget expansion of 0.5 percent. But Berlin and Amsterdam won’t accept it. “The Eurogroup did not accept the task of defining figures and establishing goals,” Dijsselbloem said shortly.

France is particularly unhappy. It is also sailing into political difficulties. Prime Minister Valls resigned on Tuesday, announcing his candidacy for president after Francois Hollande refused to seek re-election amid the threat of a presidential run-off in the spring between the right and extreme right.

Greece, meanwhile, bore the brunt of the nervousness caused by Italy. The discussion on the unsustainability of the Greek debt was again avoided, so the International Monetary Fund’s participation in the program remains in the air.

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