Italy defends budget as EU warns of "unprecedented" violation of rules

BRUSSELS (Reuters) – Italy's Prime Minister defended his budget for free spending on Thursday, dismissing criticism from Brussels as the European Commission exerted pressure on a bill calling an unprecedented violation of the country's budget rules. 39; EU.

Giuseppe Conte also faced dissatisfaction with the 2019 tax plan at home, summoning a Saturday government meeting to dismiss an internal disagreement over the terms of a partial tax amnesty.

The project, signed on Monday by the Italian government, will help reduce the deficit at a time when EU regulations stipulate that it should decrease, increase social security spending and reduce the age of unemployment. retirement.

In the first formal stage of a procedure that may result in a rejection of the budget by Brussels and fines against Italy, the Commission sent Thursday to Rome a warning letter.

The document indicates that the budget appears to be "a particularly serious case of non-compliance" with the EU rules, its deviation from the targets being "unprecedented" and gives Rome up to the end of the year. to October 22 to react.

EU officials pointed out that they were seeking Italy's response and amendments to the draft budget before taking any further action. "We have time," said the Commissioner for the Economy, Pierre Moscovici, at a press conference in Rome, after delivering the letter to the Italian Minister of Finance, Giovanni Tria.

Conte stated that Italy was ready to respond to the concerns of the commission but that the letter did not worry him. He did not think that the deviation from the Italian objectives was important and hoped that the Commission would send similar letters to Spain, France and Portugal.

"Italy is a special case," an EU official told Reuters, adding that letters to other governments would only warn of possible budgetary risks.

Conté called the budget "magnificent". He said Wednesday when he arrived at a two-day European summit that he saw no possibility of changing course.

If it was not changed, the Commission could before October 29, which would constitute an unprecedented initiative that could further undermine the financial markets.

The spread between Italian and German 10-year yield spreads has reached its widest level in 5 and a half years after the announcement of the Broken Commission Letter.

COALITION SPAT

Other EU leaders have also warned Italy about the budget, some in public and others in camera, while Conté was exposing his plans – an unusual gesture at a summit of the EU.

Before the meeting, Austrian Chancellor Sebastian Kurz said the tax rules should be respected by all.

Dutch Prime Minister Mark Rutte said on Twitter that he expressed his concerns in Conte on Thursday, and that the Commission enjoyed the full support of the United States. Low to ensure compliance with EU budget rules. .

Deputy Prime Minister Luigi Di Maio, leader of the 5-star party, said Wednesday that a piece of legislation on a partial tax amnesty had been "manipulated" before its final approval. , raising doubts about the stability of the Italian coalition government and budget revenues.

The 5-star anti-establishment is still opposed to amnesties – a policy frequently used in Italy, according to which people or companies can avoid being sued for tax evasion by paying a fee. Its coalition partner, the far-right League, favors amnesties, which bring money to the treasury and are popular with voters.

Di Maio said on Thursday that the dispute had to be settled because it was upsetting the financial markets.

Interviewed by journalists about the breakup of the coalition, Conté, who is not part of any political party, replied: "There is no division."

But later in the day, he said at a press conference that he had convened a government meeting for Saturday in order to overcome political differences over the text.