Europe Politics

Rome and EU could be ready to compromise over Italy's spending plans, local media reports

Key Points
  • Italy and the European Commission could be ready to compromise over Italy's 2019 spending plans, according to an Italian media reports.
  • La Repubblica newspaper reported Tuesday that the European Commission is willing to accept an increase in Italy's deficit target to 1.95 percent for next year, Reuters reported. Meanwhile, it said that Italy's ministry of finance was targeting a budget deficit of 2 percent for 2019.
Italy's Interior Minister and deputy PM Matteo Salvini (R) and Italy's Labor and Industry Minister and deputy PM Luigi Di Maio gesture during the swearing in ceremony of the new government led by Prime Minister Giuseppe Conte at Quirinale Palace in Rome on June 1, 2018.

Italy and the European Commission could be ready to compromise over Italy's 2019 spending plans, according to local Italian media reports.

La Repubblica newspaper reported Tuesday that the European Commission is willing to accept an increase in Italy's deficit target to 1.95 percent for next year. Meanwhile, it said that Italy's Finance Minister Giovanni Tria was ready to target a budget deficit of 2 percent for 2019.

Although not an agreement over the budget deficit targeted by Italy in 2019, the report suggests that both sides are willing to compromise after Italy's spending plans put it on a collision course with Brussels.

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Matteo Salvini and Luigi Di Maio, the leaders of the Lega party and Five Star Movement respectively, formed a coalition government in May and produced controversial 2019 spending plans that envisage the introduction of a basic income (called a "citizen's income") for the poor, a lower retirement age and a proposed flat tax rate.

The 2019 budget had envisaged a deficit of 2.4 percent in 2019 as a result and while this is within the official EU limit of 3 percent, Brussels rejected the budget. It said that it goes against EU rules that states should work towards lowering their budget deficits (Italy's previous government had already agreed to a lower budget deficit of 0.8 percent) and debt piles (Italy has the second highest debt pile in the euro zone of 133 percent of GDP).

The commission started what's known as an "excessive deficit procedure" against Italy and said the government needs to amend its spending plans if it wants to avoid sanctions, including a possible fine and reduced EU funds.

Italy's Finance Minister Giovanni Tria is pushing the government to reduce its deficit target to 2.0 percent, to find a compromise with Brussels, La Repubblica said, Reuters reported. There has been resistance from the Deputy Prime Ministers Matteo Salvini and Luigi Di Maio to amend their spending plans, however.

Il Messagero newspaper reported Tuesday that time is running out for the Italian government to respond to the EU's rejection of its budget, saying it has until Wednesday -- when Italy's Prime Minister Giuseppe Conte is due to meet the commission's president Jean-Claude Juncker -- to produce "concrete proposals" that correct the budget.

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Fellow Italian newspaper Corriere della Sera reported Tuesday that Rome and Brussels "are still far apart" and that Juncker was asking for more cuts to spending, of around 10 billion euros, that would have been used towards the proposed citizen's income and pension reform.