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Italy says it won't budge over budget

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 Italy says it won't budge over budget
Italy's Interior MinisterMatteo Salvini speaks during a press conference in Rome on October 8, 2018. Photo: Alberto Pizzoli/AFP
15:45 CEST+02:00
The Italian government insisted Wednesday it would stick to budget forecasts despite a jump in borrowing costs sparked by nervous bond investors, and concerns over the numbers underlying the spending plan.

Late Tuesday, the parliament's budget office (UPB), which is charged with verifying whether the government's spending and revenue plans meet EU limits, rejected the forecasts used in the 2019 budget as too optimistic.

The independent body was created in 2014 in an effort to boost transparency and confidence in public finances.

The government bases its budget on 1.5 percent growth, while the UPB expects growth to reach between 1.1 and 1.3 percent, and the International Monetary Fund only sees an expansion of around 1.0 percent.

Slower growth than forecast would translate into less revenue for the government, resulting in a higher-than-planned deficit, in turn raising concerns at EU headquarters.

Finance Minister Giovanni Tria told lawmakers that the UPB had based its forecast on "partial and outdated" information and confirmed the government's growth outlook.

Deputy Prime Minister Matteo Salvini, leader of the far-right League, also insisted the budget won't change.

"We won't turn and go backwards because this is a budget which aids the country. Period," he said.

READ MORE: 'Budget of change': Italy announces plans to end austerity and rack up public debt

The government's plans to increase the budget deficit next year to 2.4 percent to step up social spending has raised concerns in Brussels, which believes Rome needs to cut the deficit in order to begin reducing its massive debt, which exceeds 130 percent of annual economic output.

Italy's central bank and public accounting office have also expressed concerns about the government's budget plan.

Meanwhile, investors have sold off Italian government bonds.

Italy paid a rate of return of 0.949 percent to investors on one-year treasury bills in a placement of six billion euros on Wednesday, the highest rate in five years. 

The yield was double what it paid one month ago, and higher borrowing costs will also frustrate the government's spending plans.

The "spread", or difference between the rates on 10-year debt paid by Italy compared with those offered by fiscally conservative Germany, is a closely watched indicator of investor confidence in Rome.

It rose above the symbolic 3.0 percentage point level on Wednesday. 

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