Italy vows to keep euro, big-spend­ing bud­get de­spite a stand­off with EU

Times of Oman - - MARKET -

ROME: Italy will not leave the eu­ro­zone, pop­ulist Deputy Prime Min­is­ter Luigi Di Maio said on Fri­day, de­spite a stand­off with Brus­sels over Rome’s big-spend­ing bud­get.

“As head of the Five Star Move­ment and deputy prime min­is­ter I guar­an­tee it,” Di Maio told jour­nal­ists in Rome.

“It’s no longer time to leave the euro, I al­ready said so” be­fore the elec­tion in March, the head of the one-time fer­vently euroscep­tic Five Star Move­ment (M5S) said.

“Times have changed, over the last year I have be­come con­vinced that Italy should re­main in the eu­ro­zone,” Di Maio said. The pop­ulist gov­ern­ment in Rome has been un­der mas­sive pres­sure since the Eu­ro­pean Com­mis­sion last month rejected its 2019 bud­get, giv­ing the rul­ing coali­tion in Rome un­til Tues­day to make changes.

Fail­ing that, Brus­sels could put Italy into some­thing called the “ex­cess deficit pro­ce­dure”, a com­pli­cated process that could even­tu­ally lead to fines and pro­voke a strong mar­ket re­ac­tion.

The Ital­ian gov­ern­ment — a coali­tion of the far-right League and M5S — plans to run a pub­lic deficit of 2.4 per cent of GDP, three times the tar­get of its cen­tre-left pre­de­ces­sor. Scru­ti­n­is­ing those plans, the Eu­ro­pean Com­mis­sion on Thurs­day said Italy’s deficit will reach 2.9 per cent of its Gross Do­mes­tic Prod­uct next year, much big­ger than the 1.7 per cent in its pre­vi­ous fore­cast.

Fi­nance Min­is­ter Gio­vanni Tria in­sisted that the bud­get would not be rad­i­cally changed. The timetable for im­ple­ment­ing some of the more ex­pen­sive mea­sures, in­clud­ing a ba­sic min­i­mum in­come for poor Ital­ians and bring­ing for­ward the re­tire­ment age, has yet to be de­cided.

“The (bud­get) fun­da­men­tals will re­main the same,” Tria told jour­nal­ists af­ter talks with eu­rogroup head Mario Cen­teno.

“We con­tinue to talk with the Eu­ro­pean Com­mis­sion.”

Tria said that stick­ing to the pre­vi­ous gov­ern­ment’s 0.8 per cent deficit tar­get would be “sui­cide” given the Ital­ian econ­omy’s cur­rent slug­gish growth.

Cen­teno nev­er­the­less said Italy should re­vise its bud­get in or­der to “dis­pel doubts” on fi­nan­cial mar­kets and from fel­low eu­ro­zone economies.

“Un­cer­tainty is car­ry­ing a toll in the form of higher fi­nanc­ing costs for the Ital­ian state, Ital­ian com­pa­nies and Ital­ian cit­i­zens,” said Cen­teno, ef­fec­tively the Eu­ro­zone’s fi­nance min­is­ter.

– Reuters file pic­ture

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