The Italian government has
received a letter from the European Commission asking for
clarifications about its 2015 budget bill, the economy ministry
said Thursday.
In the letter, the EC said Italy risks deviating
significantly from medium-term budget targets agreed to with the
European Union.
"Preliminary analysis...shows Italy has planned a
significant deviation from the adjustments requested to reach
the medium-term goal (on balancing the budget in structural
terms) in 2015," the letter by European Economic Affairs
Commissioner Jyrki Katainen read.
Premier Matteo Renzi's government recently put off the
target year for structurally balancing the budget from 2015 to
2017.
The government said the planned reduction in the structural
deficit for next year will be 0.1% of GDP. According to some
reports, the EC wants a much bigger reduction in the structural
deficit - which, unlike the nominal budget deficit figure, is
adjusted for the business cycle - of around 0.5% of GDP in order
to make inroads into Italy's massive public debt of over two
trillion euros.
The 2015 budget features a 36-billion-euro adjustment, with
18 billion euros in tax cuts and 15 billion euros in cuts
generated from a review of public spending and four billion
raised from the fight against tax evasion.
Renzi said that around 11 billion euros of financial
coverage for the cuts will come from allowing Italy's
deficit-to-GDP ratio to drift up towards the 3% threshold
allowed by the EU.
But there is speculation that the European Commission may
not see the budget plan as compatible with the EU's Growth and
Stability Pact and ask for corrections.
"The Italian government will respond to the request for
clarification by tomorrow," the ministry said as the central
bank also weighed in on the issue amid fears of sanctions from
the EC.
The Italian government made "a reasoned choice" in
postponing balancing the budget in structural terms until 2017
to avoid "a downward spiral" in the national economy "given the
exceptional duration and depth of the recession," the Bank of
Italy said.
Also on Thursday, outgoing European Commission President
José Manuel Barroso berated the release of the letter in Italy.
"The Commission was not in favour because we are in a phase
of negotiations and consultations with several governments," he
said, adding that "most" Italian media outlets have published
"lies" and "inventions" about work by him and by the EC.
Later in Brussels, Renzi belittled Barroso's comments.
"The time of secret letters is over," Renzi said. "This is
the time of clarity and transparency. I'm astonished Barroso was
surprised we published the letter".
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