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Renzi vows to respect EU pledges after revival plan

But premier says Europe cannot just be budget policeman

13 March, 18:28
Renzi vows to respect EU pledges after revival plan

(By Paul Virgo) (ANSA) - Rome, March 13 - Premier Matteo Renzi said Thursday that Rome will abide by its budget commitments to the European Union after announcing a major package of tax cuts and investments to revive the weak Italian economy on Wednesday. Earlier in the day the European Commission welcomed the measures but added that the EC would only be able to properly assess them when it has the "details of the legislation" and stressed that Rome must abide by its budget commitments. "I want to say that the Italian government will respect all the commitments it has with Europe," said Renzi, who is seeking to boost the Italian economy, which remains weak after emerging from its longest postwar recession last year.

However, the leader of the centre-left Democratic Party (PD) also stressed that the EU should not just be a severe policeman of fiscal discipline.

"We have to make it possible for Europe to be a Europe of the people and of the citizens, not just of limitations," Renzi told a conference in the Lower House.

"We have to get away from the leap-year concept of Europe, in which every four or five years we vote (in European elections) and then for the rest of the time the technicians handle Europe". He also reiterated that his government, which was sworn in last month, wants to put Italy's public finances in order not to keep the EU happy, but "because our children ask us to".

Renzi's comments came after the spokesperson for European Economic and Monetary Affairs Commissioner Olli Rehn gave his package a guarded reception. "It is important to respect the rules of the stability pact, which means balancing the budget in structural terms and being in line with the debt rules," the spokesman said. Renzi said plans to cut income taxes by 10 billion euros, invest 1.74 billion euros in social housing programs, spend 3.5 billion euros on schools and repay 68 billion euros in outstanding bills for government services by July would not cause Italy to breach the 3%-deficit-to-GDP threshold allowed by the EU. But the EU wants Italy to do more than just stay under the 3% deficit limit. The Commission recently said the 2014 budget passed by Renzi's predecessor Enrico Letta did not do enough to bring down Italy's massive public debt of over two trillion euros, around 132% of GDP. As a result it put Italy under "specific monitoring" over its "excessive macroeconomic imbalances", which include high debt and poor competitiveness, as part of an in-depth review.

In its monthly bulletin, the European Central Bank complained Thursday that Italy has not made "tangible progress" on hitting budget-deficit targets set by the Commission.

Italian government sources said that the ECB's bulletin was scheduled in advance, so the comments on Italy were not a condemnation of Renzi's new measures.

But the conclusions of the report were still hard-hitting.

"In November 2013 the Commission recommended that additional consolidation measures be adopted to ensure compliance with the Stability and Growth Pact (i.e. to achieve the medium-term objective of a balanced structural budget in 2014 and ensure sufficient progress towards compliance with the debt criterion during the transition period)," it read. "To date, however, no tangible progress has been made with regard to the Commission's recommendation. "Looking ahead, it is important that the necessary steps are taken to ensure fulfilment of the requirements under the preventive arm of the Stability and Growth Pact, particularly with regard to putting the debt-to-GDP ratio on a downward path, as also recently highlighted by the European Commission in the context of its in-depth review for Italy".