EU welcomes Italy’s deficit-cutting plans

ROME: Italy’s latest plans to rein in its deficit are a “step in the right direction,” EU Commission chief Jean-Claude Juncker said yesterday Rome gave the green light to a package of reforms aimed at lopping 3.4 billion euros off the budget shortfall this year.

“The Italian government’s pledge is a step in the right direction... Italy is making enormous efforts to rein in its public deficit,” Juncker told the daily La Repubblica. “Nevertheless, in the medium and long term, in order to save themselves and the monetary union, the Italians must clean up their public finances in a decisive manner,” Juncker said. On Tuesday, Prime Minister Paolo Gentiloni announced that his cabinet had approved a package of economic reforms that would knock 0.2 percentage points off Italy’s deficit ratio this year. The reforms include measures to fight tax evasion and reduce public spending, but do not entail any tax increases.

At the same time, Rome upgraded its forecast for economic growth this year to 1.1 percent from 1.0 percent previously, following growth in 2016 of 0.9 percent. The European Commission had written to Rome in mid-January demanding that it revisit its 2017 budget plans and shave off 3.4 billion euros ($3.6 billion) or face penalties. Italy’s 2017 budget adopted last autumn had pencilled in a deficit equivalent to 2.3 percent of GDP-significantly higher than the 1.8 percent initially demanded by Brussels.

“The deficit-to-GDP ratio will be reduced to 2.1 percent this year,” Gentiloni said Tuesday.

“Our forecasts are cautious and it has often turned out in recent years that they are corrected positively afterwards.” Italy has the second highest public debt of any EU country, equivalent to 133 percent of its GDP in 2016.

It 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.

“Italy has all the instruments available to be a driving force within the EU,” Juncker said in the newspaper interview yesterday. “That said, I’m saddened to see the country losing competitiveness day by day, year by year,” he continued, suggesting that its growth rate was currently “too weak.”

Turning to the migrant crisis, in which Italy is very much on the front line, Juncker suggested that the country “receive the Nobel Peace Prize given all it has done to save lives in the Mediterranean”.

But he rejected accusations that Europe had left Italy on its own to tackle the migrant crisis.

“That’s not true. From the beginning, I’ve said that the tragedy of immigration cannot only be the problem of Greece or Italy, but must be treated as a European problem,” Juncker continued. That was why the EU had drawn up a system for sharing the numbers of asylum-seekers and taking in and registering the refugees, he added. — AFP