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