TALY’s leaders has issued a warning to European Commission President Jean-Claude Juncker after Matteo Salvini said he was “extremely happy” with its budget plans for next year which will see public spending ramped up dramatically.
And Mr Salvini, who is interior minister as well as being the controversial leader of right-wing party Lega, has also issued a veiled threat to Brussels by saying his country favoured closer ties with Vladimir Putin’s Russia.
The government, which handed in the budget proposals Brussels last night, said it is targeting a budget deficit of 2.4 percent in 2019.
Even though the figure is within the Commission’s rules for budget deficits not to exceed three percent of GDP (gross domestic product), it is still significantly higher than the 1.8 percent previously promised by the Italian Government.
The budget is aimed at delivering on key campaign promises, includes a pledge to cut income and corporate tax – but economists fear it could cost upward of €10billion.
Final cabinet approval of the spending plans has been delayed until today, with government sources saying there were tensions between the ruling coalition parties over plans for a partial tax amnesty.
However, speaking last night, Mr Salvini was bullish about the proposals, saying during a press conference: “I am extremely happy, we are keeping our promises, slowly but bravely.
“We are dismantling the previous pension law, giving back the right to work to 400,000 Italians.
“We are not raising taxes of any kind for 2019.”
Prime Minister Giuseppe Conte, who was appointed to his post at the recommendation of Mr Salvini and coalition partner, Five Star Movement (MS5) leader Luigi Di Maio, added: “We are keeping all our promises, we are very happy with this budget.
“This is the outcome of a lot of work and a lot of meetings that we have transparently made public.
“We have worked on a project, more than on a budget, we have worked on a project that the country needs, that citizens need.
“And, best of all, we are keeping the accounts in order, and delivering on our promises at the same time.”
His comments followed a speech to Italy’s Senate in which he said: “Italy is an EU founder and a net contributor. Belonging to Europe is an essential part of the program to improve socio-economic conditions of Italians and Europeans.
“We are going to Brussels with a budget we are proud of and on which we want to dialogue without prejudice. Austerity is no longer viable”
The budget relies on Government forecasts suggesting Italy’s high debt to GDP ratio, currently about 130 percent, will fall to 126.7 percent of GDP in 2021.
Economists are concerned at the plans, with Thanos Vamvakidis, head of G-10 FX strategy at Bank of America Merrill Lynch, telling CNBC: “We believe that this budget cannot possibly be accepted by the EU, it is a clear violation of the fiscal rules.
“The Italian government has shown some signs they’re willing to compromise but they’re still far apart and we need some more market discipline.”
Meanwhile, in a separate move also likely to alarm Brussels, Mr Conte said European Union sanctions against Russia were damaging Italian companies, adding that his government wanted to deepen its ties with Moscow.
His remarks came a day after Deputy Prime Minister Matteo Salvini had defined the EU sanctions a “social, cultural and economic absurdity”.
In the coalition contract drawn up in May, Italy’s ruling parties wrote that Russia should not be seen as “a menace but rather an economic and commercial partner, potentially increasingly significant”.
Rome has long said that existing sanctions were damaging Italian firms trading with Moscow, and calls for de-escalating tensions with Moscow have grown louder since a new anti-establishment government took office in Italy in June.
Mr Salvini is an admirer of Russian President Mr Putin and has rejected allegations of Russian meddling in Western elections.
A European Commission spokeswoman said: “The Commission has received draft budgetary plans for 2019 from all 19 euro area Member States.
“The Commission will now begin its assessment of the draft budgetary plans.
“We will present our Opinions once these assessments have been completed, before the end of November.
“This is all part of the normal European Semester process, the EU’s economic policy coordination cycle, and happens each year.