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Italy cuts budget deficit to avoid EU disciplinary action

Tuesday, 2 July 2019


The Italian cabinet has agreed to reduce the country's budget deficit target by 0.3 per cent in 2019 to avoid European Union (EU) disciplinary action.

The measure was seen as a necessary step for the third largest economic country in the eurozone to negotiate with the EU and avoid the bloc's possible deficit infringement procedure for high debt.

The country’s deficit target in 2019 would now be at 2.1 per cent of gross domestic product (GDP), down from a 2.4 per cent goal set in April, according to a statement by Italian Finance Ministry.

The new budget deficit target was included in an ad-hoc package with urgent measures to improve public finance balances, which "consists of a draft law for the 2019 budget adjustment certifying 6.1 billion euro correction ... and a decree-law freezing 1.5 billion in expenses," said the ministry on Monday.

The 1.5-billion-euro saving would derive from resources previously allocated to implement a basic income scheme and a pension system reform, reports Xinhua.

The measures, which came after the EU Commission in early June threatened a disciplinary action against Italy for not reducing its huge public debt, would be submitted to Brussels for avoiding such action.

"The government believes the framework of public finance is largely in compliance with the rules of the (EU) Stability and Growth Pact," the ministry said.

"The approved provisions create the conditions for which the opening of a deficit infringement procedure against Italy would be unjustified," it said.

The EU Commission suggested earlier to open the disciplinary action against Italy for not complying with EU's debt rules in 2018, adding that it would not expect the country to stick to such rules in 2019-2020 either.

The country’s debt, which amounted to some 132 per cent of GDP last year, is the second largest in the EU after that of Greece.