Italy ‘in talks’ with EU over budget deficit

Italy 'in talks' with EU over budget deficit
Italian Minister of Economy and Finance Pier Carlo Padoan. Photo: Andreas Solaro/AFP
Italy is in discussions with the European Commission to try to prevent Brussels imposing penalties over Rome's management of its public finances, sources close to the talks said on Monday.

Italy was one of eight eurozone countries warned in November that they could face fines and restricted access to funds from Brussels over their failure to stick to the EU's Stability Pact rules.

The daily La Repubblica said on Monday the European Commission last week asked the government to find 3.4 billion euros (3.6 billion dollars), or 0.2 percent of GDP, in order to avoid the start of an infringement procedure.

“Brussels has reminded us that Italy's debt is too high. We all know it”, Finance Minister Pier Carlo Padoan told Rai television, without revealing details of what the Commission is demanding.

“We will see if there is a need to take additional measures to meet the objectives. But the best way to bring down debt is growth, so growth is a priority for the government.”

The government adopted a 2017 budget that foresees a budget deficit of 2.3 percent of GDP, significantly higher than the 1.8 percent level it had promised to deliver earlier last year, at a time when Italy's public debt is the second highest in the EU at 133 percent of GDP.

The government wants costs incurred over the migrant crisis and recent earthquakes stripped out of the calculation of how Italy is doing against the standards set by the EU.

After two years of recession, Italy's economy grew 0.1 percent in 2014 and 0.7 percent in 2015. It forecasts that will rise to 0.8 percent in 2016 and 1.0 percent this year.

“The programme of privatizations will restart this year and we are expecting higher growth than in 2016,” said Padoan.

A spokesman for the European Commission declined to comment.

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