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The Italian Minister of the Economy, Giovanni Tria, listens to journalists' questions at a joint press conference with the Portuguese Finance Minister and the head of the Eurogroup Mario Centeno, in Rome on Friday, November 9, 2018. She told lawmakers that Italy would maintain its 2019 budget plan, despite concerns from European officials as to a sharp increase in spending. (AP Photo / Andrew Medichini) The Associated Press
By COLLEEN BARRY, AP Business Writer
MILAN (AP) – The Italian populist government has maintained its controversial budget deficit of 2.4% in response to demands for EU changes, but has changed its position at a Cabinet meeting on Tuesday night, including plans to sell certain government real estate.
Deputy Prime Minister Luigi Di Maio told reporters in Rome that the government was not changing ambitious social spending plans in its budget proposal because "we are convinced that this is what the country needs to revive."
The government has insisted that spending is needed to promote growth after years of austerity.
The Minister of the Economy, Giovanni Tria, was preparing a letter in Brussels that would outline the fundraising projects through the sale of secondary real estate, which, according to Di Maio, would have an impact on the extremely high public debt of l & # 39; Italy. He did not specify what would be sold, but said that it would not include "family jewels".
Di Maio also suggested that there would be no safeguard clause that would lead to a reduction in spending if the deficit was exceeded, as reported by the Italian media. He said the government was determined to stay within the deficit of 2.4 percent of GDP.
"We will not play fox with the deficit," he said. "But at the same time, we will respect the commitments made to the Italians in the contract with the government.There will be all cuts for waste, unnecessary military spending and social measures to make social rights to Italians. "
European officials strongly opposed the deficit of 2.4%, more than three times the goal of the previous government and at a level that would prevent Italy from reducing the debt burden as promised.
Italy's debt currently accounts for around 130% of GDP, well above the EU's 60% limit and the second highest in Europe after Greece. The major concern is that doubts about Italian debt could revive the financial turmoil as well as questions about the future of the euro.
The European Union rejected Italy's draft budget, saying that it was breaking the rules and giving the government until midnight Tuesday to present a new version. The Italian government could face penalties if it does not comply.
The real estate sale project was unlikely to persuade Brussels, especially since the positive impact is not assured. The sale of government properties was also a feature of the technical government of Mario Monti, who had planned in 2011 to raise 30 billion euros by 2020 through the sale of government properties.
This stalemate has destabilized investors, who have sold Italian debt in recent months, raising the country's borrowing rates. This could be dangerous, as higher rates could hurt Italian public finances, reinforcing investors' fears in a vicious circle.
Such a scenario could force the government to cut during a period of economic uncertainty. "This could turn a slowdown into a recession," said the International Monetary Fund in its report, a periodic report on the Italian economy released Tuesday.
He recommends that Italy tighten its public finances instead and predicts that the government will miss its own targets, with the deficit standing at 2.7% next year.
The International Monetary Fund warned the Italian government that its plans to significantly increase spending entailed "substantial" risks and would make the country vulnerable to market turbulence. He urged Italy "to dispel any concerns about the sustainability of the public debt, which has recently resurfaced".
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