Italy to control deficit, stick to big-spending budget

Italy’s populist government on Monday responded to EU criticism of its budget with a vow to stick to its public spending hike while scrupulously keeping to its own deficit limits.

“The figure of 2.4 percent (deficit to GDP ratio in 2019) is a ceiling that we have solemnly undertaken to respect,” Prime Minister Giuseppe Conte told journalists after the coalition sent its pledge in a letter to EU officials in Brussels.

“It’s possible that we don’t reach it, but it’s certain that we won’t exceed it,” Conte said of the self-imposed deficit limit.

The government had until midday to reply to Brussels’ concerns about the cost of its draft budget aimed at stimulating growth.

Despite the war of words, Conte also vowed that Italy would remain within the European Union and keep the euro currency.

“Read my lips: For Italy there is no chance of Italexit, to get out of Europe or the eurozone,” Conte said, amid growing concerns over the prospect of Britain crashing out of the bloc without an agreement.

A deficit of 2.4 percent of annual economic output next year would be triple the amount forecast by the previous Italian government and come close to the EU limit of 3.0 percent.

In turn, it would aggravate Italy’s already massive debt mountain, at some 130 percent of gross domestic product (GDP), way above the EU 60 percent ceiling and second only to Greece’s in Europe.

But the coalition government of the anti-establishment Five Star Movement and anti-immigrant League has said it would reduce total debt to 126.5 percent in 2021.

In its four-page letter to the European Commission, Italy’s government admitted its budget was “not in line with the norms of the stability and growth pact” governing EU member state public finances.