Published: Sun, October 21, 2018
People | By Leon Thompson

Italy defends budget amid European Union accusation of rules violation

Italy defends budget amid European Union accusation of rules violation

Italy will respond to the European Commission's reproach over its budget plans within the set time scale - by midday on Monday, sources at the premier's office said on Friday.

Di Maio, also deputy prime minister, said on Wednesday the text of the amnesty had been "manipulated" after his party had signed off on the measure in cabinet, raising doubts about the stability of the coalition government.

The EU's executive Commission, which must vet Italy's 2019 draft budget, has already warned that the nation's significantly higher deficit targets represent a deviation "unprecedented in the history" of EU budget rules.

The downgrade from Moody's - from Baa2 to Baa3 with a stable outlook - is the latest move by worldwide financial watchdogs sounding the alarm over Italy's economic health.

German chancellor Angela Merkel told reporters after the meeting that Conte briefed her on reforms, from the fight against corruption to the transparent digital structure of public administration, but that on the budget, Italy needs to engage in a "positive dialogue" with the European Union commission.

Austrian's Kurz said fiscal rules should be respected.

The cabinet meeting was called in part because Di Maio had claimed that unauthorized changes were made to the draft budget, involving a proposal to extend a tax amnesty on money held overseas and brought back to Italy.

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It includes a series of pension and tax changes that will cost 37 billion euros ($43 billion), of which 22 billion will be paid for by expanding the deficit.

The head of one of Italy's two ruling parties says the government won't fall over a dispute on the budget draft, which would offer a tax amnesty to Italians with accounts overseas.

Rome wants to give a boost to growth via a higher demand, and more investment.

His remarks came as European Union leaders raised concerns about Rome's extravagant budgetary plans that could further increase Italy's public debt ratio, which at 133 percent of gross domestic product is the highest in the EU after Greece.

Analysts say Rome is in a good bargaining position, given the Eurozone's ongoing difficulties with Brexit. He told a late-night talk show that the draft budget presented to President Sergio Mattarella's office contained a proposal to extend a tax amnesty on money held overseas and brought back to Italy. "May is a long way off - let's see, I'm thinking about it".

"After 10 years spent in the procedure of excessive public deficit, France does not give a lesson", said the French president Emmanuel Macron.

Brussels repeatedly issued angry warnings, but Paris was never punished, drawing bitter criticism from balanced budget sticklers, such as Germany and the Netherlands. The EU has limits for member states' deficits and debt levels.

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