The global financial markets are anxiously awaiting the details of a revised draft budget for Italy, whose Eurosceptic government is expected to present a second budget proposal to the European Commission on November 13 after the first was rejected last month on grounds that it did not comply with the European Union’s rules on debt.
The Italian government’s deficit target for 2019 is 2.4%. Brussels, however, argues that the budget submitted would lead to a 3.1% deficit, well over the EU’s limits.
Since it’s rejection of the first budget proposal, the European Commission has since downgraded Italy’s growth and deficit projections. The EU now expects the Italian economy to decelerate and the actual 2019 and 2020 deficit to surge, while public debt will remain at the same level.
Last week’s meeting between Eurogroup President Mario Centeno and Giovanni Tria, the Italian Minister of the Economy, did not signal a breakthrough in the standoff. Tria promised that Italy would review its deficit, debt, and growth forecasts before sending a revised budget proposal.
He made clear, however, that Italian government would not bow to the Commission’s demands for a 0,8% deficit target, which, according to Tria, would be “suicidal” as it would accelerate the Italian economy’s economic slowdown.
Centeno has tried to strike a conciliatory tone, saying it is imperative that both sides find a positive result in the budget talks as it is in everyone’s interest.