Italy’s lower budget deficit still not good enough: EU Commission

Italian government ministers have suggested the deficit target could be reduced to 2.2 percent, but European Commission chiefs remain unimpressed.

Italy’s lower budget deficit still not good enough: EU Commission

A reduction in Italy's planned public deficit from 2.4 to 2.2 percent, as some top government officials have suggested, would still not be enough for the country to escape EU sanctions, European Commission Vice President Valdis Dombrovskis said today.

Brussels officially rejected Italy's big-spending budget on November 21, 2018, clearing the way for unprecedented sanctions and deepening a bitter row with Rome's populist government.

The new Italian budget aims to scrap EU-pushed cost-cutting measures agreed by the previous government and instead promises more public spending, including a basic monthly income for the unemployed and a pension boost.

The so-called 'people's budget' planned for a deficit of 2.4 percent, considerably higher than the 0.8 percent the previous centre-right government had planned for.

The Italian government had initially said it would not move on the planned budget.

If an agreement is not reached, Italy could find itself the target of a so-called excessive deficit procedure.

Brussels has warned Italy that a refusal to review its plans could activate the procedure, a complicated process that could lead to fines and possibly provoke a strong, adverse market reaction.

In an interview with the La Stampa newspaper, Dombrovskis said that since the deficit of 2.4 percent of GDP in the Italian budget was considerably wide of Rome's EU obligations, a substantial change is needed.

In recent days Italian officials have indicated they are open to a possible compromise in which the deficit is trimmed down.

“If, during the negotiating process, the deficit has to be reduced a bit, that's not a big deal,” deputy prime minister Luigi Di Maio told Radio Radicale on Monday.

Meanwhile, League head Matteo Salvini, co-deputy prime minister, said on Sunday that “no-one is attached to that (deficit number). If there's a budget that boosts the country's growth it can be 2.2 percent or 2.6 percent. The decimal point is not the point”.

But when asked whether a reduction of 0.2 percentage points would be enough to reach a compromise, Dombrovskis told La Stampa that it seemed “insufficient.”