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| Version 1 | Version 2 |
|---|---|
| Italy budget: Rome rejects European Commission demands | Italy budget: Rome rejects European Commission demands |
| (35 minutes later) | |
| The Italian government has defied the European Commission by sticking to its big-spending budget plan. | The Italian government has defied the European Commission by sticking to its big-spending budget plan. |
| Deputy Prime Minister Matteo Salvini said a deficit target of 2.4% and a growth forecast of 1.5% were unchanged. | Deputy Prime Minister Matteo Salvini said a deficit target of 2.4% and a growth forecast of 1.5% were unchanged. |
| The Commission, worried by the impact of high spending on Italy's high levels of debt, had told Rome to revise the budget or face possible fines. | The Commission, worried by the impact of high spending on Italy's high levels of debt, had told Rome to revise the budget or face possible fines. |
| It had set Tuesday as a deadline to Italy's governing populist parties to respond to its objections. | It had set Tuesday as a deadline to Italy's governing populist parties to respond to its objections. |
| The Commission's warning to Italy, the eurozone's third-biggest economy, is an unprecedented move with regard to an European Union member state. | The Commission's warning to Italy, the eurozone's third-biggest economy, is an unprecedented move with regard to an European Union member state. |
| It will now decide whether to begin disciplinary measures against the Rome government. | It will now decide whether to begin disciplinary measures against the Rome government. |
| Italian government bond yields rose sharply early on Wednesday amid fears that its budget decision would raise borrowing costs. | Italian government bond yields rose sharply early on Wednesday amid fears that its budget decision would raise borrowing costs. |
| Why does Italy want to spend more? | Why does Italy want to spend more? |
| Italy's government, made up of the populist Five Star Movement and right-wing populist League, came to power vowing to "end poverty" with a minimum income for the unemployed, along with promises of tax cuts and scrapping extensions to the retirement age. | Italy's government, made up of the populist Five Star Movement and right-wing populist League, came to power vowing to "end poverty" with a minimum income for the unemployed, along with promises of tax cuts and scrapping extensions to the retirement age. |
| To fulfil its promises it trebled the previous government's deficit target of 0.8% of Italy's economic output. | To fulfil its promises it trebled the previous government's deficit target of 0.8% of Italy's economic output. |
| In its letter to the Commission, Italy reaffirmed its commitment to maintain public finances, but insisted it would stick to a deficit target of 2.4% which it said was an "impassable limit". | |
| The government said it would aim to generate 1% of GDP by selling state assets with which it would pay back debt. | The government said it would aim to generate 1% of GDP by selling state assets with which it would pay back debt. |
| Mr Salvini, who leads the League party, was quoted as telling Rai radio on Wednesday that the Commission had " got it wrong if they are even just thinking of imposing fines on the Italian people". | Mr Salvini, who leads the League party, was quoted as telling Rai radio on Wednesday that the Commission had " got it wrong if they are even just thinking of imposing fines on the Italian people". |
| Luigi Di Maio of Five Star said: "We have the conviction that this is the budget needed for the country to get going again." | Luigi Di Maio of Five Star said: "We have the conviction that this is the budget needed for the country to get going again." |
| The government argues that servicing its debt of 131% of national output - second only to bailed-out Greece - would hurt Italians, who have still not recovered from the decade-old financial crisis. | The government argues that servicing its debt of 131% of national output - second only to bailed-out Greece - would hurt Italians, who have still not recovered from the decade-old financial crisis. |
| Italy's economy is still smaller than it was in 2008. The governing coalition argues an increase in spending would kick-start growth. | Italy's economy is still smaller than it was in 2008. The governing coalition argues an increase in spending would kick-start growth. |
| How bad is Italy's debt? | How bad is Italy's debt? |
| Italy's neutral Finance Minister Giovanni Tria and international observers had hoped the country would keep its deficit under 2% of GDP - and perhaps as low as 1.6%. | Italy's neutral Finance Minister Giovanni Tria and international observers had hoped the country would keep its deficit under 2% of GDP - and perhaps as low as 1.6%. |
| While 2.4% falls well short of the 3% deficit limit under eurozone rules, Italy's debt level is alarming. | While 2.4% falls well short of the 3% deficit limit under eurozone rules, Italy's debt level is alarming. |
| "For the first time the Commission is obliged to request a euro area country to revise its draft budgetary plan but we see no alternative than to request the Italian authorities to do so," the EC Vice-President for the euro, Valdis Dombrovskis, said last month. | "For the first time the Commission is obliged to request a euro area country to revise its draft budgetary plan but we see no alternative than to request the Italian authorities to do so," the EC Vice-President for the euro, Valdis Dombrovskis, said last month. |
| He pointed out that Italian taxpayers were having to spend as much servicing the national debt as on education. | He pointed out that Italian taxpayers were having to spend as much servicing the national debt as on education. |
| "Breaking rules can appear tempting at the first look - it can provide the illusion of breaking free," he said. | "Breaking rules can appear tempting at the first look - it can provide the illusion of breaking free," he said. |
| "It is tempting to try and cure debt with more debt. At some point, the debt weighs too heavy... you end up having no freedom at all," Mr Dombrovskis said. | "It is tempting to try and cure debt with more debt. At some point, the debt weighs too heavy... you end up having no freedom at all," Mr Dombrovskis said. |
| German Chancellor Angela Merkel said on Tuesday that the EU wanted to reach out to Italy but that it had adopted budget rules "that we all now have in common". | German Chancellor Angela Merkel said on Tuesday that the EU wanted to reach out to Italy but that it had adopted budget rules "that we all now have in common". |