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The Italian government announced Wednesday a relaxation of public spending plans that alarmed investors and partners in the euro area, saying that they would be gradually reduced after 2019.
Economy Minister Giovanni Tria confirmed that next year's deficit-to-GDP ratio would be higher than that agreed by the previous government with the European Commission. But he added "that there would be a gradual reduction of the deficit from year to year".
This remark confirms a Corriere della Sera report that the 2.4% budget deficit in the new spending plan would only apply to next year and not to the three-year spending plan.
Prime Minister Giuseppe Conte's office also issued a statement on Tuesday, saying officials were working on a proposal that "will accelerate the decline of the debt-to-GDP relationship over the next three years."
The government's apparent slowdown was aimed at easing the financial markets, as investors feared that the projected rise in government spending would hurt efforts to reduce debt.
The yield on 10-year Italian government bonds fell, a sign of easing investors' fears. And Milan's benchmark stock index, the FTSE MIB, has risen by more than 1%.
The new Italian populist government is increasing its spending to keep its election promises, including to provide job seekers with a basic income, eliminate an unpopular pension reform and reduce taxes. But the extra spending pushes the deficit even higher than what Tria initially sought.
Tria said at a conference organized by the country's main economic pressure group that the government's economic policies were aimed at reducing the growth gap between Europe and Italy, which was very late, "and at the same time ensuring a steady reduction in the debt-to-GDP ratio."
"We need strong growth and, at the same time, increased resilience," said Tria, adding that boosting investment was a crucial element.
