Italy says seeking ‘space’ to tweak budget amid EU dispute

ROME (Reuters) – Italy is looking for ways to contain public spending while supporting flagging economic growth in a bid to head off disciplinary action by the European Commission, Economy Minister Giovanni Tria said on Wednesday.

Tria told the Senate the government was looking for “financial space to improve the balance between the need to support growth and the need to solidify the sustainability of the public accounts”.

The comments came less than two days after the government signaled it may be willing to lower its deficit spending plans to appease the commission, which says the country is breaking European Union spending rules, and financial markets concerned about Italy’s ability to pay off its massive debt.

The ruling coalition said on Monday it would conduct a cost analysis of its main budget measures and left open the possibility of reducing its deficit target of 2.4 percent of gross domestic product — three times the level set by the previous government.

Two sources had told Reuters on Monday the coalition, composed of the anti-establishment 5-Star Movement and the right-wing League, may reduce next year’s deficit goal to as low as 2 percent of GDP.

Top ministers will hold a meeting to discuss the budget later this afternoon, a government source said.

Tria told the Senate the previous center-left government’s economic targets were unrealistic and that little had been done to support economic growth in the past. He also said growth was slowing faster than had been expected a few months ago.

The commission took a first step last week to disciplining Italy over the budget after Rome refused to change it, raising the stakes in a dispute that has alarmed the whole euro zone and could eventually lead to fines.

If EU governments confirm the commission’s opinion that the budget breaks spending rules and starts a disciplinary action, then parliament will have to “assume a very responsible decision and conduct a reality check,” Tria said.

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