Italy moves to reassure EU on budget

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Italian Economy Minister Giovanni Tria attends as Prime Minister Giuseppe Conte (unseen) speaks during his first session at the Lower House of the Parliament in Rome, Italy, June 6, 2018. REUTERS/Tony Gentile

VIENNA (Reuters) – Italy understands it must tighten its public finances, its finance minister said on Friday after talks with EU authorities, signalling that ambitious spending plans set out by Rome would not conflict with Brussels’ fiscal rules.

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Giovanni Tria offered his reassurances after speaking with European Commission Vice President Valdis Dombrovskis on the sidelines of a meeting of European Union finance ministers.

The leaders of the parties in Italy’s government, the far-right League and the anti-establishment 5-Star Movement, have been promising since forming their coalition in June to spend more and tax less, unnerving markets as well as authorities in Brussels.

Investors have heavily sold Italian debt as a result, prompting a more conciliatory tone this week from the government on its budget plans.

Mr Dombrovskis said in a tweet that Mr Tria had acknowledged that Italy needed to cut its structural deficit and start reducing public debt in its 2019 budget.

The minister tweeted in turn that his meeting with Dombrovskis produced a common line on adopting “measures for economic growth which are in line with rules and allow an improvement of public finances”.

However, Mr Tria has consistently been the most fiscally conservative voice in the coalition, and new divisions might yet emerge within the government over its spending plans.

An improvement of 0.1 percent of gross domestic product in Italy’s structural balance would translate into a headline deficit of between 1.5 and 1.7 percent, EU officials and economists estimated.

Sources in Rome said last Monday that Mr Tria, an academic who is not a member of either of the governing parties, is pushing to keep next year’s deficit below 2 percent of GDP.

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