The European Commission's
March assessment of Italy's 2015 budget will reflect parameters
with "new flexibility" but the government of Premier Matteo
Renzi must continue to meet its commitments on deficit reduction
and structural reforms, a senior EC official said Monday.
Economic and Financial Commissioner Pierre Moscovici said
that includes meeting the targeted 0.25% reduction in the
structural deficit.
Still, new flexibility in the commission's interpretation
of Europe's budget stability regulations is opening more room
for countries like Italy which have struggled with lingering
recession and poor economic prospects.
Italy has argued for more flexibility from the EC in
assessing spending on infrastructure and other measures aimed at
stimulating the sluggish economy.
Last week, the Bank of Italy reduced its outlook for
Italy's gross domestic product (GDP) to just 0.4% in 2015 from
an earlier prediction of 1.3%.
In a quarterly outlook, the central bank estimated that the
economy in 2014 lost 0.4% compared to one year earlier, and
suggested matters could have been worse if not for Italian
budget measures that included stimulative programs which helped
the country to "avoid a prolonged recession".
The EC wants to see "key data on the budget, reforms and
(planned) efforts (at fiscal consolidation) by the end of the
week," he said.
The Commission also wants Italy to outline its forecasts
and targets as part of "ongoing technical exchanges" to be
followed a "second technical mission" to Rome before the end of
February, added Moscovici.
The new regulations permitting more flexibility in
calculating deficit levels should be helpful for Italy, lowering
the necessary reduction to 0.25% from previous expectations of
0.50%, he said.
Ultimately, if Italy fails to make the necessary reforms,
Brussels has the final option of imposing sanctions but to do
that would be a sort of "defeat," for the EC, he said.
"The purpose of the Commission is not to punish but to
convince, we want to have a constructive dialogue (with the
Italian government,)" he said.
Meanwhile, as the Bank of Italy report last week forecast
continued economic sluggish sluggishness throughout this year,
it added that deflation will be a persistent problem - something
that is also an issue across the eurozone.
Last month, inflation actually fell below zero in both the
eurozone and in Italy, where annual average GDP has remained
below zero in both 2012 and 2013.
The European Central Bank is said to be close to
introducing a controversial program of massive sovereign bond
buying to stimulate inflation and raise it closer to the ECB's
target of 2%.
Such a program, known as quantitative easing, could be
outlined by the ECB as early as its next regular meeting on
Thursday, officials have hinted.
The ECB is studying experiences in the United States and
Britain with quantitative easing (QE).
The central bank is concerned about persistently low
inflation in parts of the eurozone, which is a sign of a
sluggish economy.
QE is one method of stimulating expansion that ECB
President Mario Draghi has frequently discussed, but it has been
opposed by Germany.
Bundesbank President Jens Weidmann has argued that such
measures as QE are not needed.
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