ROME: Italy has approved plans to cut its budget deficit by an extra £2.88 billion (€3.4 billion) in an effort to placate its EU partners and the European Commission.
The measures were only agreed by Prime Minister Paolo Gentiloni’s centre-left cabinet following heated debates, which offered a taste of the bigger challenges yet to be faced in the autumn with a new budget.
The upcoming budget is expected to have very little room for growth-boosting policies and will set the tone for the 2018 general election.
Following a two-hour cabinet meeting to approve the measures, Mr Gentiloni said: “We are delivering a message of strong reassurance that our accounts are in order, and not because of higher taxes.
“We are continuing to follow the path of reforms and growth.”
The European Commission had threatened to open excessive deficit procedure against the country if it did not move swiftly to bring its deficit targets closer to EU requirements.
The Commission can impose fines of up to 0.2 per cent of GDP on Eurozone countries that repeatedly ignore recommendations to fix their budget problems.
Italy is burdened by the highest public debt in the Eurozone after Greece, and has often clashed with EC officials over its expansive budget policies.
The country’s economy is projected to expand by 1.1 per cent this year, slowing to just one per cent growth in 2018 and 2019.
Padoan said the limited growth rate predictions were due to “stringent fiscal policies,” and are part of the government’s EU commitments.
However, he hinted that there could still be some room for negotiations with Italy’s European partners in an effort to find new ways of balancing fiscal rigor with investment-boosting policies.
