EC warns Italy over budget

(ANSA) - Rome, November 28 - The European Commission said Friday that Italy is at risk of not respecting the EU's Stability and Growth Pact with its 2015 budget, and said it would "assess the situation at the start of March 2015". It said it would also re-assess the situations in France and Belgium following "the approval of the budget laws and the specific provisions of the programs of structural reforms" that the three countries have committed to "at the highest levels". The EC added that Rome had to "adopt the necessary measures to guarantee that the budget conforms to the Pact".
    The announcement that the EC was not giving a negative verdict on the budget plan, even though that plan delays action towards balancing the budget in structural terms, was widely expected. This is because Premier Matteo Renzi's government has argued that the current situation is exceptional as, after years of recession and austerity, Italy cannot risk prolonging the downturn further with more budget consolidation. The executive has also argued that it is working hard to push through structural economic reforms that will deliver growth in the medium and long term. The EC recognised that Italy has made "some progress" on its recommendations to put the country's economic and financial house in order, but said Rome needed to do more to reduce its massive public debt of over two trillion euros. To do this, the EC said, it is necessary to introduce "policies to increase growth, keeping primary spending under tight control by increasing the efficiency of public spending" and pressing ahead with a privatization programme. "The EU will say that there are exceptionally negative circumstances in terms of the country's deep recession, but also positive ones in terms of the agenda of structural reforms," Economy Minister Pier Carlo Padoan had said earlier. "This means that a country with a high debt level has the chance to kick start a virtuous mechanism". Also on Friday, European Economic and Monetary Affairs Commissioner Pierre Moscovici said that Italy must make an extra effort with its 2015 budget law to satisfy the EU. "The budget is not yet fully compatible with the rules of the (Stability and Growth) Pact," Moscovici said. "That's why we are asking for Italy to make a little extra effort...when you look at the debt level, there's a strong need for this". The Renzi government recently said it was putting off balancing the budget in structural terms until 2017. However, it did change its 2015 budget law to increase the reduction in the structural deficit to 0.3% next year from the originally planned 0.1% in order to win approval from the European Commission. Italy's economy ministry hailed what it said was a "positive appraisal" by the European Commission. "No infraction procedure is in the offing. However, the Commission saw a risk of non-compliance with Stability and Growth Pact rules, and will assess progress made in March," the ministry said.
    The government will forge ahead with reforms "with courage and determination" to make Italy competitive once more, including "via privatizations," the ministry added.