Italy’s proposed deficit defies EU warning
ROME: Italy’s new government has proposed a 2019 budget with a deficit three times bigger than the previous administration’s target, setting up a clash with the European Commission and sparking a selloff of state bonds.
Italy has the heaviest debt burden among big European Union economies, at 130% of gross domestic product. It is under pressure from the EU to rein in spending amid fears it could sow the seeds of a debt crisis in the heart of the euro zone.
The fourmonthold government late yesterday offered a budget with a deficit of 2.4% of GDP for the next three years, to fund a major expansion of welfare spending, tax cuts and a boost to public infrastructure investment.
It marked a victory for rulingparty chiefs over Economy Min ister Giovanni Tria, a fiscal conservative who had initially wanted a deficit set as low as 1.6%.
‘‘They seem to be on a collision course with Brussels,’’ said ING rates strategist Martin van Vliet.
European Economics Commissioner Pierre Moscovici said nothing would be gained from a clash with Italy but added: ‘‘We don’t have any interest either that Italy does not respect the rules and does not reduce its debt, which remains explosive.’’
The coalition government of the 5Star Movement and the League, which took power in June, had been pushing for a deficit around 2.4% of GDP to fund costly campaign promises.
5Star leader Luigi Di Maio said the budget would set aside ¤10 billion ($NZ17.6 billion) for 5Star’s flagship policy of a ‘‘citizens’ income’’ of up to ¤780 per month for 6.5 million poor Italians.
League chief Matteo Salvini said it would also allow people to retire earlier, freeing up about 400,000 jobs for the young, and cut tax rates for a million selfemployed workers.