ZCZC
BCN-09
EU-EUROZONE-ECONOMY-ITALY-BUDGET
Italy reassures nervous eurozone on budget plans
VIENNA, Sept 8, 2018 (BSS/AFP) – A top EU official on Friday said that
Italy’s budget plans were going in the right direction despite calls for a
major spending boost by the anti-establishment government in Rome.
Italy has become becoming a major concern for eurozone finance ministers
who met in Vienna for the first time since Greece, their previous worry,
ended its bailout programme in August.
Rome’s debt currently stands at a towering 132 percent of gross domestic
product (GDP), making Italy’s the second largest debt ratio in the eurozone
after Greece.
But the anti-EU government in Rome, which brings together the far-right
League party and the anti-establishment Five-Star Movement, is under pressure
to meet electoral pledges and boost spending instead of slashing its deficit,
as promised by the previous government.
“Minister (Giovanni) Tria assured me that currently the budget which is
under preparation foresees improvement on the structural balance of Italy’s
budget,” Latvian Valdis Dombrovskis, Vice President of the European
Commission told a news conference.
“This clearly is a commitment which goes into right direction,” he added
after meeting Tria on the sidelines of the talks in Austria.
The fragile state of Italy’s economy has reawakened memories of the debt
crisis amid dangers that Italy could face punitive measures by its EU
partners if it insisted on breaking bloc rules on running excessive deficits
and high debt.
“I expect and hope that Italy will, in the next few days too, present an
appropriate and sensible proposal for the 2019 budget,” said Hartwig Loger,
the finance minister from Austria, which holds the EU’s rotating presidency.
“If Italy should … come up with another proposal, I assume that the
European Union will provide a suitable response,” he said.
Pressed on Italy, German Finance Minister Olaf Scholz warned: “I always
assume that everyone adheres to European rules.”
The tensions over Italy’s spending plans will grow until October 15 when
Rome must deliver its budget proposal to the Commission, the EU’s executive
arm.
– ‘Pragmatism will prevail’ –
“Austerity is one thing, lack of seriousness is another,” said the EU’s
Economic Affairs Commissioner Pierre Moscovici, who will lead the budget
talks with Rome.
“I want to believe that seriousness, realism, pragmatism will prevail,” he
added.
In Vienna, Moscovici and Dombrovskis sat down with Tria, who wants to
reassure financial markets about the stability of Italy.
Nervous markets are closely tracking developments on the budget, putting
pressure on the rates Italy must pay to meet its colossal borrowing needs.
In recent days, the so-called “yield spread” — which measures the
difference in perceived risk between Italian and ultra-safe German government
bonds — has come down from alarming levels but is still much wider than
officials would like.
BSS/AFP/HR/0932