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AFP
Best friends? Italian Prime Minister Giuseppe Conte discusses the budget impasse with the President of the European Commission
The Italian government has stated that it will stick to its high-spending budget plans, thus creating a potential stalemate with the European Union over its deficit.
Prime Minister Giuseppe Conte, who met on Monday with MPs Matteo Salvini and Luigi Di Maio, said the targets for 2019 had already been set.
However, Mr Di Maio hinted earlier that the government might be willing to slightly reduce the deficit target.
The European Commission has threatened a fine if Italy does not revise its plans.
The Italian government promised to "end poverty", tripling the budget deficit projected by the previous government.
Italian media reported Monday morning that the deficit could be reduced from 2.4% to 2.2% of GDP – but government sources quoted by Reuters suggested the deficit could be reduced to 2%.
Deputy Prime Minister, Luigi Di Maio, suggested that the government be willing to reduce the deficit target to end the stalemate with the EU: "If, during the process of Negotiation, the deficit needs to be reduced a bit, this is not serious.
But in a joint statement Monday, the three men seemed to take a tougher stance, saying "the goals already set are confirmed".
Italy's draft budget provides costly measures for the establishment of a guaranteed basic monthly income of about 780 euros for poor families and the removal of the extension of the age of retirement.
Monday's statements follow a weekend meeting in Brussels between Mr Conte and the President of the European Commission, Jean-Claude Juncker.
It was unclear how any reduction in spending would be funded if the main election promises made by the ruling populist parties, the League and Five Star parties, remained unchanged. Nor was it certain that the changes would be enough to satisfy the European Commission.
"Sleepwalker in instability"
Last Wednesday, the Commission announced that Italy "was sleeping in instability" and that the opening of a procedure under the "excessive deficit procedure" of the zone euro was now considered.
The fines provided for in this procedure could start at 0.2% of Italy 's total GDP, which would amount to billions of euros.
The reason for Europe's concern is that if Italy is the third largest economy in the euro area in terms of GDP, with a GDP of more than two billion euros she also has a large debt.
Eurozone rules stipulate that countries must both limit their deficit to less than 3% of GDP – as envisaged by Italy's plans – but also maintain their national debt at 60% of GDP or less .
Many countries exceed this debt limit without any action being taken. But with almost 132% of GDP, Italy is the second highest rate in the bloc.
When Brussels received Italy's draft budget, it said that the country's refusal to deal with its debt and triple the expected deficit were unacceptable.
At the same time, Italy claimed that it was necessary to invest to revive the gloomy Italian economy and alleviate the suffering of its citizens.
