EU less optimistic than Italy on growth, sees jump in deficit
Italian benchmark 10-year bond yields jumped on the forecast from 3.385 to 3.413 percent IT10YT=TWEB.
The forecasts underline the Commission’s view, backed last Monday by all euro zone finance ministers, that Italy’s 2019 draft budget blatantly breaks European Union fiscal rules, which call for annual reductions in deficit and debt.
The Commission’s projections are likely to provide arguments for the EU executive arm to start disciplinary steps against Rome later this month, unless Italy sends in a revised budget draft that is in line with EU rules by Nov. 13.
Itay has repeatedly said it would not change the draft budget’s targets, triggering a clash with the rest of the euro zone by the populist government in Rome that won elections on promises of higher spending and tax cuts.
Italian Economy Minister Giovanni Tria said the forecasts were wrong and limited.
“The European Commission’s forecasts for the Italian deficit are in sharp contrast to those of the Italian government and derive from an inaccurate and incomplete analysis (of the budget),” Tria said in a statement.
“We regret to note this technical slip on the part of the Commission, which will not influence the continuation of constructive dialogue with the Commission,” he added.
European Commissioner for Economic and Financial Affairs Pierre Moscovici said he would travel to Rome on Friday and was keen to retain a dialogue, but that there could be no compromise on the rules.
“The word compromise is difficult for me,” Moscovici told a news conference. “In the case of Italy I have always been in favour of flexibility,” he said.
“As far as rules are concerned, however, we need to respect the rules, we can’t have a sort of negotiation.” – Reuters