Italy to consider lowering deficit in move to end EU row
Italy had said it could consider reviewing its spending plans for next year in an attempt to end a row with the EU over its budget.
Claiming that it wanted to "end poverty" , the government in Rome had set a public deficit to GDP target of 2.4% for 2019, but the European Commission had insisted that it was too high.
Italy is the third-largest economy in the Eurozone, with a GDP of almost two trillion euro, but it also has a significantly larger amount of debt as a proportion of GDP, at 132%, than other euro area countries. Hence the European Commission's insistence for Rome to also cut its structural deficit, which takes into account both the economic cycle and one-off measures.
Since presenting their draft budget to Brussels two months ago, both coalition party leaders had repeatedly refused to change their spending plans.
But Deputy Prime Minister Luigi Di Maio said on Monday his government might be willing to reduce the deficit target to end row.
"If, during the negotiating process, the deficit has to be reduced a bit, that's not a big deal," Mr Di Maio said.
"The important thing is that not one person misses out on the (pledged) measures," Mr Di Maio added.
Nevertheless, it was still unclear how spending might be reduced. One option would be delaying the implementation of the citizens' income and increase the retirement age. Another possibility would be tu funnel the citizen's wage to businesses who hire and train the unemployed.
The apparent change of heart from Italy came after Primer Minister Giuseppe Conte met in Brussels with the President of the European Commission, Jean-Claude Juncker.
The Bank of Italy said on Friday that rising yields on Italian government bonds were hurting private wealth and undermining the financial sector, making it harder for companies to borrow.
On Monday, the European Central Bank’s chief economist, Peter Praet, said increasing borrowing costs would offset any of the possible economic advantages to hiking spending in breach of EU rules next year.
Italian media said on Monday the deficit could be cut from 2.4% to 2.2% of GDP but Reuters reported it go as low as 2%.