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By Gavin Jones
ROME (Reuters) – Italy was caught unawares by the Brussels authorities and its partners in the European Union, while Deputy Prime Minister Luigi Di Maio backed the uncompromising line of his ally. Coalition.
The government has tripled the goals of its predecessor and set last week a deficit target of 2.4% of gross domestic product for the next three years, disconcerting markets and causing criticism and requests for reconsideration from officials from the European Commission.
"We will not go back on this 2.4% goal, this has to be clear … We will not back off a millimeter," Di Maio said in a radio interview.
While an overall deficit of 2.4% would remain within the 3% limit of the European Union, Italy's current structural – or underlying – deficit would increase in line with the overall figure, which is contrary to the rules of the EU.
The Commission is also concerned that the budget will push up Italy's huge public debt, which is second in importance in the European Union after that of Greece. The government says the debt-to-GDP ratio will decline as a result of stronger economic growth stimulated by the expansionary budget.
In Luxembourg, Valdis Dombrovskis, Vice President of the Commission for the Euro, said that he hoped that Italy would align the draft budget with the EU rules and was open to dialogue.
Di Maio, who heads the five-star anti-establishment movement, said there was "no doubt" that the French and German leaders wanted the fall of the Italian government.
MORE EASILY OUTSIDE THE EURO AREA?
Monday, late, the other Italian Deputy Prime Minister, Matteo Salvini, leader of the right-wing League, reacted in front of Commission President Jean-Claude Juncker, who had said that the EU was to be "strict" with Italy to avoid jeopardizing the project of the euro.
"Nobody in Italy is trapped in Juncker's threats," Salvini said in a statement. He said the government's priority is to meet the basic needs of its citizens and that critics of its budget "will not stop us".
The government's job is made more difficult by a massive sell-off of Italian bonds that accelerated on Tuesday, when eurosceptic League legislator Claudio Borghi said the country's economic situation would be easier if it comes outside the euro area.
Borghi is not a minister and has not hinted that the government plans to leave the euro, but his comments have nonetheless sent the yield of the Italian benchmark bonds to 3.4%, a summit in four and a half years, while the shares of Italian banks plunged.
Di Maio later reiterated the government's official position that he had no intention of leaving the eurozone or the EU.
He accused European officials of stirring up market tensions over the Italian budget and said the government's opponents were hoping to use the financial markets to weaken the ruling coalition.
These attempts would fail, Di Maio said, as the five-star and right-wing coalition, which took office in June, was totally united.
The Minister of Economy, Giovanni Tria, left Monday in Luxembourg a meeting of EU finance ministers to travel to Rome to refine the government's budget plan, which has still not not published.
(additional report by Giselda Vagnoni, edited by John Stonestreet)
