Rome is reportedly set to bow down to EU pressure to modify its spending plans as it desperately aims to avoid disciplinary action and sanctions from Brussels. According to Italian daily Avvenire, Prime Minister Giuseppe Conte will unveil a new budget proposal today. Italy had set itself on a collision course with Brussels after drafting an expansionary budget with a deficit target of 2.4 percent of GDP in 2019 from 1.8 percent this year. The EU has rejected the budget, saying the plans will not lower Italy’s large public debt as required by the grouping’s rules.
Brussels then urged Rome to come back with revisions to prevent a procedure that could eventually lead to fines.
Prime Minister Conte reportedly told Avvenire the new proposal could reasonably include a deficit lower than previously forecast, but did not reveal details of his plan.
He was quoted as saying: “I’m preparing a proposal of mine which the European Union cannot not take into consideration. It will arrive within hours.”
The Italian government had previously vowed to stick to its main spending goals for next year while awaiting for a cost analysis of its spending measures.
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Mr Conte was said to have received an economic forecast on how welfare benefits and lowering the retirement age would impact the Italian finances.
The Prime Minister said this allowed him “margin for maneuver to spend and use in the negotiation”, according to reports.
He said reducing the deficit target “could reasonably happen” but refused to give specific numbers in order to have “confidentiality for the negotiation to succeed”.
EU commissioner for economic affairs Pierre Moscovici said today the European Commission (EC) was waiting for concrete and “credible” moves from Italy to revise its draft 2019 budget.
Mr Moscovici said talks with Rome were now proceeding at an intense pace, but stressed the Commission was “waiting for more details”.
He told a news conference: ”We need commitments that have to be credible.”
Mr Moscovici stressed the EC was not interfering with fiscal policies chosen by the Italian government, but was trying to make sure they were compatible with EU fiscal rules.
He said: ”We are not disputing the pension reform, the choice is for the Italian government because it is up to the Italian government to make its own policy choices.”
Italy’s Junior Economic Minister Massimo Bitonci said today an agreement with the EC might not be found, but the italian government would do everything to avoid a disciplinary procedure.
Mr Bitonci said speaking on state broadcaster Rai: “Everything possible will be done to avoid it.”
Italian yields have dropped sharply in recent days on hopes that Italy finds a compromise with the EU on its budget plans.
Yesterday saw Italian borrowing costs tumbled to their lowest level in around two months.