Italy warned over EU budget rules

Italy warned over EU budget rules

Italy must respect European Union budget rules with its 2019 budget and improve public finances, a top International Monetary Fund official said.

Poul Thomsen, the head of the IMF’s European department, told a news conference on Friday that Rome was wrong to target an increase in its headline and structural budget deficit next year in breach of EU budget rules.

“We still project relatively strong growth in Italy next year. This is not the time to relax fiscal policy, this is the time to have some fiscal structural adjustment,” Thomsen said at the IMF’s annual meeting on the Indonesian resort island of Bali.

The populist government in Rome plans a headline gap of 2.4 percent of GDP next year, triple the previous administration’s target. EU officials estimate this would translate in to a rise in the structural deficit of 0.8 percent of GDP, while EU rules ask for a 0.6 percent cut, rather than an increase.

 

“A fiscal relaxation of that magnitude... is not correct. The market reaction has been quite unfavourable and that illustrates the point about fiscal space,” Thomsen said.

The European Commission, which is the guardian of EU rules, and euro zone finance ministers have said the planned deficit most likely meant a rise in Italy’s public debt which is already the second biggest in Europe at 133 percent of GDP.

Published: by Radio NewsHub
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