Italian PM: It’s a ‘beautiful’ budget

EU steps up pressure

BRUSSELS (Reuters) – Italy's Prime Minister defended the country's “beautiful” 2019 budget on Thursday, brushing off criticism of it from Brussels as European authorities stepped up pressure for changes to a draft that breaches the bloc's fiscal rules.

Giuseppe Conte also denied a rift over the fiscal plan within his governing coalition, after reports of a spat over tax revenues.

The draft, signed off by Italy's cabinet on Monday, will hike the deficit at a time when under EU regulations it should be falling, as well as boosting welfare spending and cutting the retirement age.

In the first formal step of a procedure that could lead to Brussels rejecting the budget and to fines against Italy, the European Commission will send Rome a warning letter. An EU official said it was expected be to delivered on Thursday.

European Commission President Jean Claude Juncker said Italy had used up all the fiscal flexibility available under EU rules, and Brussels would examine the draft without prejudice.

Conte said he was not worried by the letter, and that he expected the Commission to send others to Spain, France and Portugal.

Prior to news of the letter, he told reporters: “I'm aware this is not the budget the Commission expected. I expect critical observations. We will discuss and we will reply to these considerations.”

He said the budget was “beautiful,” having said on Wednesday – the first day of a two-day EU summit – that he saw no room for changing tack on it.

If it is not amended, the Commission could reject the draft by October 29 in what would be an unprecedented move that could further rattle markets.

Yields on Italian benchmark 10-year bonds spiked after elections in March that gave euroskeptic parties a large boost , rising further as the outline of an ambitious fiscal plan that could further boost Italy's public debt ratio – proportionally already the second highest in the EU after Greece – became clear.