Italy pledges to respect EU financial rules

Deputy PM Matteo Salvini

Italy's coalition government seeks to reassure financial markets and Brussels over the government's forthcoming budget, as key ministers promise Rome would respect EU budget discipline. Investors have sold off Italian bonds since the government took office in June, on concern that the coalition may implement policies that would increase the country's already-huge debt and breach EU fiscal rules.

Credit rating agency Fitch on 31 August lowered the outlook for Italian debt, which is the second highest in Europe after Greece.

“If we want to run the country for a long period we cannot blow up its public accounts,” Deputy PM Matteo Salvini told the newspaper Il Sole 24 Ore on Wednesday. The priority will be given to rolling back a 2011 pension reform that raised the minimum retirement age, Salvini said, adding that the changes could cost €6-8bn according to some calculations. He added that tax cuts would be implemented gradually and would initially favour small businesses.

Salvini met his fellow Deputy PM Luigi Di Maio and PM Giuseppe Conte on Wednesday to discuss the 2019 budget, which has to be issued by mid-October and which will be the government's first major legislation. “The budget law will be courageous and will keep accounts in order,” Di Maio, who is also the Five Star leader, told reporters afterwards. “Here, we have people saying we want to wreck the accounts and destroy Europe.” He also said the package would include key campaign promises, such as introducing a so-called “universal income” for the unemployed, watering down a 2011 pension reform and tax cuts.

Italy's coalition government is due to deliver Rome's latest economic growth and public finance targets at the end of the month, before the full budget. According to some Italian media, Economy Minister Giovanni Tria, an academic who is not a member of either of the governing parties, is pushing to keep next year's deficit below 2% of GDP, but a League source said on Tuesday that Salvini wanted the government to accept a deficit “a bit above” 2% - a reason for Brussels and the markets to doubt the recent statements of Italian politicians.

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