Renzi revised budget approved - sources

(ANSA) - Rome, October 28 - Italy's 2015 budget was set to receive European Commission approval Tuesday after deeper cuts were made to meet the EC's requirements.
    The news came from EC sources shortly before the revised budget and the government's three-year fiscal blueprint were to be outlined for Premier Matteo Renzi's cabinet.
    Later, those documents, including 4.5 billion euros in changes to ensure a deeper reduction to Italy's structural deficit, were to be presented to parliamentarians.
    The changes had been outlined in a letter sent Monday by Economy Minister Pier Carlo Padoan to Jyrki Katainen, European Union's commissioner for economic affairs.
    In the letter, Padoan pledged a reduction of 0.3% in the ratio of deficit-to-gross domestic product (GDP) in 2015, larger than the 0.1% cut originally planned in Renzi's 36-billion-euro budget.
    The move was designed to win EU approval for the Italian budget that includes 18 billion euros in tax cuts and 15 billion euros in spending reductions.
    Padoan was expected to appear before the finance committees of the House and Senate later to outline the changes while other parliamentarians will get a chance to review the amended document later in the week.
    According to Loredana de Petris, a Senator with the Left Ecology Freedom (SEL) party, the Senate will see the document on Thursday.
    Meanwhile, a spokesman for Katainen said Padoaon's letter - and a similar message from France - were considered to be "constructive contributions" to its analysis of European budgets.
    France was also reportedly poised to see its budget approved after it pledged to cut its deficit by 3.6 billion euros, according to media reports.
    Renzi's government had initially planned to reduce the structural deficit of the eurozone's third-largest economy by just 0.1% next year in a budget aimed at bolstering recession-battered GDP.
    But a letter Katainen sent to Rome last week said the original budget plan would lead to a "deviation" from Italy's medium-term adjustment targets, and was therefore in breach of the EU Stability and Growth Pact.
    Renzi reached an agreement to deepen the deficit reduction at last week's European Union summit in Brussels - a compromise solution with the EC, which reportedly wanted a cut of around 0.5%.
    Padoan said the measures to reduce the structural deficit by 0.3% of GDP in 2015 will cost 4.5 billion euros. Of those, 3.3 billion euros would be taken from funding previously allocated for tax cuts, 0.5 billion would come from EU co-financing funds, while 0.73 billion would come from an extension of the reverse charge VAT on imported goods and services.
    He also warned that Italy must be avoid enduring another year of recession. "Italy's GDP has fallen over 9% on its 2008 level," read the letter by Padoan. "The economy is in its third year of recession and there is a serious risk of stagnation and deflation. A fourth year of recession must be avoided at all costs".