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On july 8th euro-zone watchers breathed a sigh of relief. The zone’s 19 finance ministers backed the European Commission’s decision that Italy should not be penalised for allowing its public-debt burden to rise in 2018 in violation of the eu’s fiscal rules. Thanks to savings of 0.4% of gdp for the current year, cobbled together by Italy’s governing coalition, a damaging confrontation seems to have been resolved.
In truth, however, it has merely been postponed. The grim reality of Italy’s public finances remains unchanged. Its deficit is on course to exceed the eu’s threshold of 3% of gdp in 2020, its debt is sky high and, worst of all, it is plagued by a persistent absence of growth. If Italy is to dispel the ever-present air of crisis, a much more far-sighted deal will be needed.
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