October 16, 2018
Finance

Italy working to lower budget targets under pressure from Brussels and markets

ROME — After much delay, which has raised concerns in Brussels and among investors, the Italian government is due to forward the draft documento di economia e finanza (DEF) on the budget to parliament on Wednesday.

But tensions within the government remain high.

According to three sources in Rome briefed on the discussions, Finance Minister Giovanni Tria is working to lower the anticipated 2.4 percent budget deficit-to-GDP ratio for 2020 and 2021. “Given the significant departure from the previous commitments, one way to calm down the markets and Brussels would be to commit to a gradual reduction of the ratio across the next three years,” one Treasury official said.

On Tuesday evening, Prime Minister Giuseppe Conte met with top Cabinet officials, including Tria and 5Stars leader Luigi Di Maio, to discuss the way forward after concerns raised by European officials at the ECOFIN in Luxembourg earlier this week.

At the end of the meeting, Conte issued a statement saying: “We confirm the anticipations that had led us to define it a serious, rational and courageous budget. We confirm the reform program that will start in 2019, and we have worked on designing the budget in a way that will consistently bring down the debt-to-GDP ratio across the next three years.”

However, according to two MPs, there are substantial differences between the 5Stars and the Leagues approaches.

“The 5Stars would rather head back to the polls than give up on the universal income, but the League isnt playing along,” one 5Stars MP said. The universal income pledge is deeply disliked by the Leagues wealthy voter base in northern Italy.

“This is the real plan B, not exiting the euro,” the MP added, referring to League MP Claudio Borghis statements on Tuesday.

This morning, Tria and top Treasury officials are meeting to discuss numbers and finalize the draft to be sent to parliament.

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