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article imageRome says Brussels 'failed' with Italy economy forecast

By AFP     Nov 8, 2018 in World

Italy's finance minister on Thursday rejected a European Commission forecast that its deficit would balloon thanks to its big-spending budget as a "technical failure".

"We regret to note the Commission's technical failure," Giovanni Tria said in a statement, slamming "an inadequate and partial analysis" of the populist government's proposed 2019 budget.

According to Brussels, Italy's deficit will reach 2.9 percent of its gross domestic product next year, much bigger than the 1.7 percent in its previous forecast.

"The fact remains that the Italian parliament has authorised a maximum deficit of 2.4% for 2019 that the government, therefore, is committed to respecting," Tria said.

Crucially, the EU believes Italy will grow by a mere 1.2 percent in 2019 while Rome's 2019 budget is based on an estimate of annual growth of 1.5 percent.

Brussels last month took the unprecedented step of rejecting the budget of coalition partners the far-right League and the anti-establishment Five Star Movement.

In its Thursday forecast, the Commission said it believed that continued overspending means Italy's massive debt will remain unchanged at around 131 percent of GDP over the next two years.

But Prime Minister Giuseppe Conte insisted that Italy's debt would be reduced to 130 percent of GDP next year and to 126.7 percent in 2021.

The Commission "underestimates the positive impact of our budget and our structural reforms," Conte said in a statement.

"Let's move forward with our estimates... there are no grounds for questioning the validity and sustainability of our forecasts," Conte said.

Any other scenario is "absolutely unlikely" said Conte.

Italian leaders insist a high debt and low growth rate are all the more reason to kickstart the economy through a spending spree.

The Italian government said that while the Commission's forecast was in "sharp contrast" to its own, Rome still wanted "constructive dialogue".

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