Italy government sticks to budget targets despite EU pressure

(Reuters) – The Italian government will maintain its deficit and economic growth forecasts for 2019 despite European Commission demands for the budget plan to be revised, Deputy Prime Minister Matteo Salvini said late on Tuesday.

The Commission last month rejected Italy’s plan for a big increase in the deficit and described its growth forecast for 2019 as overly optimistic. It set Tuesday as a deadline for Rome to respond to its objections.

In a statement released after a cabinet meeting, Salvini said the deficit target would remain at 2.4 percent of economic output, and the growth forecast at 1.5 percent, though asset sales would be beefed up and spending closely monitored.

The International Monetary Fund said earlier that Italy’s fiscal stimulus plans would leave the country vulnerable to higher interest rates that could ultimately plunge it into recession, recommending instead a “modest” fiscal consolidation to reduce financing costs.

The IMF said after an annual staff review of Italy’s economic policies that any temporary, near-term growth gains from the stimulus is likely to be outweighed by the “substantial risk” of a rapid deterioration.