Italian cabinet due to approve budget as EU, markets fret

ROME: The Italian cabinet is due to meet on Monday to approve a 2019 budget which envisages a jump in the deficit that has upset financial markets and drawn criticism from the European Commission and other international bodies.

The government, backed by the right-wing League and the antiestablishment 5- Star Movement, has already issued the financial framework for the budget, raising the target for next year’s deficit to 2.4 per cent of gross domestic product.

That is comfortably below the EU’s 3 per cent ceiling, but up sharply from a targeted 1.8 per cent this year, flouting EU rules which call on highly- debt countries like Italy to narrow the deficit steadily towards a balanced budget.

The reaction from Brussels has been fierce, with EU commissioners threatening to reject the package before even formally receiving it, and triggering a war of words with the ruling parties in Rome.

The Commission says the budget will push up Italy’s public debt which already amounts to 131 per cent of GDP, proportionately the highest in the euro zone after Greece’s, rejecting Rome’s argument that the expansionary package can lower debt by boosting economic growth.

The budget marks “a change of gear for Italy”, Prime Minister Giuseppe Conte said on Sunday, adding that he was confident the EU would soften its stance after the government has had the chance to explain its growth strategy properly.

Italy must send its planned fiscal framework to Brussels on Monday, and the Commission can reject it and ask for changes, setting off a possible process of negotiations.

Deputy Prime Minister and 5Star leader Luigi Di Maio said on Friday the cabinet would sign off on the package on Monday, but no time has yet been set for the meeting and many aspects of the budget measures have still to be hammered out. — Reuters