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by Francesco Guarascio and Jan Strupczewski
BRUSSELS (Reuters) – Euro-zone finance ministers on Monday urged Italy to modify its draft budget for 2019 and to respect the European Union's budget rules, an official from the European Union said.
Italian Finance Minister Giovanni Tria said he was working on a compromise, an Italian official said, stressing Italy's desire not to change its spending targets.
Ministers discussed the Italian budget at length during their monthly meeting, after the European Commission rejected the first draft on 23 October for non-compliance with EU rules.
The bill breaks the rules as it contemplates a 0.8 percentage point increase in the structural deficit (the deficit calculated excluding the impact of the economic cycle) of Italy next year while a reduction of 0 , 6 point was required.
"What is at stake today is our common currency," said the French Minister of the Economy, Bruno Le Maire, on his arrival at the meeting of the Eurogroup, before adding that he shared the EC's judgment that the Italian draft budget violates the common rules.
"The euro is one of the most important and valuable political achievements of European integration in recent years," he added.
The Italian government has until 13 November to send a new version of its budget to Brussels. But the leaders of the coalition that brings together the League (far right) and the 5 Stars Movement (M5S, "anti-system") have repeatedly ruled out making concessions. They believe that public spending must be increased to support growth.
INTERDEPENDENCE
European Commissioner for Economic and Monetary Affairs Pierre Moscovici said on Monday that the Commission would wait until 13 November before taking a decision on the possible opening of disciplinary proceedings against Italy for non-compliance with budgetary rules .
The EU executive must publish on 21 November its opinion on the draft budget of each country in the euro area, Italy included. And if Rome has not amended its plan to bring it into line with EU rules, the Commission may initiate disciplinary proceedings that could result in a fine of 0.2% of annual GDP.
Irish Finance Minister Paschal Donohoe said the eurozone debt crisis, in which his country has suffered particularly badly, has shown the dependence of each eurozone country on the stability of the others. The common rules aim to ensure this stability, he added.
To prevent a new crisis, euro-zone countries want to increase the integration of their economies, notably through a common mechanism for guaranteeing bank deposits, a euro area budget, common restructuring rules debts and a strengthening of the bank resolution fund of the region.
For Slovak Minister Peter Kazimir, "the attitude of Italy endangers our plans".
Brussels fears that Italy, whose public debt already accounts for more than 130% of GDP, triggers a major crisis by engaging in a strategy of widening the budget deficit, especially as the new expenditure planned by the project The initial budget is more about supporting consumption than about encouraging investment.
The fiscal policy of the government headed by Giuseppe Conte and the dispute with Brussels have favored in recent months the increase in yields of Italian debt, which only increases the risks to which Rome is exposed.
(Marc Angrand, Myriam Rivet and Danielle Rouquié for French service)
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