Italy reassures nervous eurozone on budget plans

VIENNA (AFP) – A top EU official on Friday said that Italy’s budget plans were going in the right direction despite calls for a major spending boost by the anti-establishment government in Rome.

Italy has become becoming a major concern for eurozone finance ministers who met in Vienna for the first time since Greece, their previous worry, ended its bailout programme in August.

Rome’s debt currently stands at a towering 132 per cent of gross domestic product (GDP), making Italy’s the second largest debt ratio in the eurozone after Greece.

But the anti-EU government in Rome, which brings together the far-right League party and the anti-establishment Five-Star Movement, is under pressure to meet electoral pledges and boost spending instead of slashing its deficit, as promised by the previous government.

“Minister (Giovanni) Tria assured me that currently the budget which is under preparation foresees improvement on the structural balance of Italy’s budget,” Vice President of the European Commission Valdis Dombrovskis told a news conference.

“This clearly is a commitment which goes into right direction,” he added after meeting Tria on the sidelines of the talks in Austria.

The fragile state of Italy’s economy has reawakened memories of the debt crisis amid dangers that Italy could face punitive measures by its EU partners if it insisted on breaking bloc rules on running excessive deficits and high debt.

“I expect and hope that Italy will, in the next few days too, present an appropriate and sensible proposal for the 2019 budget,” said Finance Minister from Austria Hartwig Loger. Austria holds the EU’s rotating presidency.

“If Italy should … come up with another proposal, I assume that the European Union will provide a suitable response,” he said.