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article imageItaly has verbal agreement with EU on 2019 budget: media

By AFP     Dec 19, 2018 in World

Italy's government has reached a verbal agreement with the EU on the country's disputed 2019 budget following discussions with senior officials in Brussels, according to sources close to the government cited by Italian media Wednesday.

"There were verbal communications from commissioners (Pierre) Moscovici and (Valdis) Dombrovskis but there hasn't yet been an official communication from the European Commission," said one source, cited by the Italian news agency Agi and other media.

Rome's budget proposal that would increase social spending was rejected by the European Commission in October, and unless a compromise is reached Italy could ultimately be fined up to 0.2 percent of the nation's GDP.

Over recent weeks, the Italian government and the Commission have been moving towards an agreement that would see the budget include a public sector deficit set at 2.04 percent of GDP and be based on expected economic growth of 1.0 percent of GDP rather than the 1.5 percent contained in the initial proposal.

No confirmation of a deal could be obtained in Rome, but Deputy Prime Minister Matteo Salvini welcomed the agreement in a statement carried by Italian media.

The European Commission meets on Wednesday and it was originally due to consider formally opening an excessive deficit procedure that could lead to fines against Italy.

A European source told AFP it was unclear whether the Commission would sign off on the budget compromise or postpone it for consideration at a later date.

The clash between Brussels and Rome broke out over plans by Italy's ruling coalition to increase the public sector deficit from the 0.8 percent of GDP planned by the previous government to 2.4 percent, mostly to finance additional social spending promised during the election.

While that remains below the EU's 3.0-percent deficit limit, EU officials have expressed concern the budget proposal did not sufficiently tackle Italy's huge debt pile, which stands at 130 percent of GDP.

Over the weekend the Italian government agreed to scale back its spending plans by 4 billion euros in order to try to reach an agreement that would avoid EU fines.

The savings are to made on two of the government's flagship measures: pension reform and the minimum revenue plan.

According to Italian media, two billion in additional savings from privatisation of state-held firms and certain tax breaks could be reviewed to generate more revenue.

Milan stocks rose 1 percent in morning trading and the yield on Italian government bonds fell.

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