Italy says won't change deficit goal despite EU 'threats'

Italy dug in its heels on Tuesday over its budget deficit despite pressure from authorities in Brussels and its EU partners, as Deputy Prime Minister Luigi Di Maio backed the uncompromising line of his coalition ally.

The government, in a tripling of its predecessor’s target, last week set out a deficit goal of 2.4 percent of gross domestic product for the next three years, unnerving markets and prompting criticism and calls to reconsider from European Commission officials.

“We are not turning back from that 2.4 percent target, that has to be clear ... We will not backtrack by a millimetre,” Di Maio said in radio interview.

While a headline deficit of 2.4 percent would be within the 3 percent European Union limit, under its current draft Italy’s structural - or underlying - deficit would rise along with the headline figure, which runs contrary to EU rules.

The Commission is also concerned that the budget will push up Italy’s mammoth public debt pile, proportionally the second highest in the EU after Greece’s. The government says the debt-to-GDP ratio will fall thanks to stronger economic growth spurred by the expansionary budget.

In Luxembourg, Commission Vice President for the euro Valdis Dombrovskis said it hoped Italy would bring the budget draft into line with EU rules and was open to dialogue.

In other remarks, Di Maio, who leads the anti-establishment 5-Star Movement, said there was “no doubt” the leaders of France and Germany wanted the Italian government to fall.

Source: Reuters