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

BRUSSELS (Reuters) – The Italian prime minister defended his spending budget on Thursday, dismissing criticism from Brussels as the European Commission put pressure on a bill calling an unprecedented violation of the EU 's fiscal rules. EU.

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

The project, which was signed Monday by the Italian government, will help reduce the deficit at a time when European regulations provide for a reduction, increase social spending and reduce the retirement age.

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

The document indicated that the budget appeared to be a "particularly serious non-compliance" with EU rules, its deviation from targets being "unprecedented", and gave Rome until 22 October to react.

EU officials pointed out that they wanted to get Italy's response and changes 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 said 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 budget risks.

Mr Conte called the budget "magnificent", having said Wednesday on his arrival for a two-day European summit that he saw no possibility of changing tactics.

If it was not changed, the Commission could reject the project on 29 October at the earliest, which would be 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 news of the Commission's letter.

COALITION SPAT

Other EU leaders have also warned Italy against the budget, some in public and others in camera, when Conté presented the plans – an unusual move when from 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 had expressed his concerns to Conte on Thursday, and that the Commission had the full support of the Netherlands to ensure that the budgetary rules of the country were met. EU are respected.

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, highlighting doubts about the government's stability of Italian coalition and on 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 prosecuted for tax evasion by acquitting themselves. ;a tax. 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 must be resolved because it was disrupting the financial markets.

Asked 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 Saturday government meeting to overcome political differences over the text.