EC revises upwards Italy deficit

Tria, Conte say budget plans won't change

(ANSA) - Rome, November 8 - The European Commission on Thursday revised upwards its budget-deficit forecasts for Italy while revising downwards its growth forecasts, prompting Italian officials to counterattack and say the 2019 budget will not change.
    In its new autumn forecasts, the EC revised its forecasts for Italy's budget deficit to 2.9% of GDP in 2019 and 3.1% in 2020.
    This was because, it said, of expensive measures in the 2019 budget including a basic income, reform of the Fornero pension reform, and public investments, all of which, the EC said, "will significantly increase spending".
    The EC said the figures do not take into account the so-called safeguard clauses, that is a VAT hike, given its "systematic sterilisation" by successive governments.
    The Commission also revised downwards Italian growth forecasts for 2018, from 1.3% to 1.1%, and for 2019, from 1.2% to 1.1%.
    The Commission said that Italy's public debt would "remain stable around 131% (of GDP) throughout all the period of the forecasts, that is from 2018 to 2020.
    This was due, it said, to the "deterioration of the deficit, united with the risks of lower growth".
    European Commission Vice President for the Euro Valdis Dombrovskis said "uncertainty and risks, both internal and external, are on the rise and are beginning to weigh on the pace of economic activity".
    Italy's planned efforts to boost growth could "prove to be less effective" than hoped, the EC said.
    The Commission said they could have "a lower impact on growth".
    The EC said that Italian growth would lag the rest of the eurozone, as it has done for the last few years - contrary to optimistic government forecasts of stronger growth.
    As well, the EC said, a higher bond-yield spread with Germany could pose risks to Italian banks.
    The revised deficit forecasts, compared to the government's estimate of 2.4% next year, could change if the 2019 budget does, European Economic Affairs Commissioner Pierre Moscovici said.
    "Our forecasts differ from the government's, because of our growth forecasts, which are more conservative, and spending forecasts that are higher in particular for the higher spending on interest," he said.
    "These forecasts are made on the basis of the Budgetary Planning Document received on October 16, but the situation could be different when the answer comes" from the Italian government, he said.
    Moscovici said there could be dialogue with Italy on its 2019 budget but that Rome must respect the rules.
    "We must respect the rules, the Commission must apply them and it cannot do other than act in the framework of the rules," he said.
    "I hope for a common solution, I want dialogue with Italy. I have always been in favour of flexibility when a country has for example known natural catastrophes, but rules exist and we have to see they are respected".
    Moscovici said the revised deficit and growth forecasts were "impartial" and warned against "polemics" over the data.
    "The quality of the work of the European Commission and its impartiality cannot be called into question," he said.
    Moscovici said Brussels' forecasts "must not lend themselves to the minimal polemics".
    He said Italy was "not alone" in seeing its own forecasts contested, adding that this had already been the case "with the previous governments".
    The government must reply by November 13 to the EC's letter asking for a revised package due to an "unprecedented" deviation from the Stability and Growth Pact.
    In response to the revisions, Premier Giuseppe Conte said the Commission was painting "unrealistic" scenarios on Italian public accounts.
    The EC forecasts, he said "underestimate the positive impact of our budget and our structural reforms," he said.
    "We are going forward with our forecasts on public accounts, on growth that will rise and on the debt and deficit that will fall.
    "There are no premises to call into question the soundness and sustainability of our forecasts.
    "For this reason we deem absolutely unrealistic any other type of scenario on Italian public accounts." He added that Italy was "not a problem" for the EU and would contribute to European growth.
    Economy Minister Giovanni Tria, for his part, said talks with the EU on the 2019 budget would carry on but Rome's ceiling of 2.4% for the budget deficit would remain unchanged.
    The EC forecast, he said, was the result of "a technical failure" and would not "influence the continuation of constructive dialogue with the Commission".
    Tria said "the fact remains that the Italian parliament has authorised a maximum deficit of 2.4% for 2019 which the government, therefore, is committed to respecting".
    The EC forecasts, Tria added, were based on an "inattentive and partial analysis".
    He said they "are in sharp contrast with those of the Italian government".
    Tria said he was "sorry" for the EC's "technical failure".