EU demands Italy, France explain their budget plans

THE European Commission yesterday demanded urgent clarifications from Italy and France on their budget plans for next year, worried they veer widely from spending cut commitments made to Brussels.

The letters from the EU’s executive arm requested a response by today and could be the first step before the commission rejects a budget outright and demands a new draft.

Portugal, Spain, Belgium and Finland were also contacted with concerns.

“Italy’s plan does not comply with the debt reduction benchmark in 2020,” said a letter signed by EU economics affairs commissioner Pierre Moscovici and commission vice president Valdis Dombrovskis.

Rome hopes to get Brussels to agree to a deficit of 2.2 percent of GDP.

But the EU said that risked delaying the reduction of Italy’s massive debt mountain, which is the second-highest in the eurozone behind Greece at 180 percent of national output.

The spending plans were the product of fraught negotiations between the new coalition in Italy, an unlikely partnership between the anti-establishment Five Star Movement and the center-left Democratic Party.

“We will provide all clarifications to the EU. We are not concerned,” said Italian Prime Minister Giuseppe Conte. “It is a necessary dialogue.”

France unveiled a draft 2020 budget last month with more than nine billion euros (US$10 billion) in tax cuts for households in its bid to move on from “yellow vest” protests while still cutting the deficit.

(AFP)