BRUSSELS (Reuters) – Italy re-submitted its draft budget for next year to the European Commission with the same growth and deficit assumptions as a draft rejected last month for breaking European Union rules, but with falling debt, the new draft showed.
The falling debt forecast, which Italy wants to achieve by using funds equal to 1 percent of GDP from privatization, is to address one of the Commission’s main concerns about the previous draft – that public debt would not fall as required by EU rules.
Budget - Deficit - Offs - Swings - Percent
But the revised budget still plans to raise its structural deficit, which excludes one offs and cyclical swings, by 0.8 percent of GDP next year, rather than cut it by 0.6 percent of GDP as required under EU rules.
This, along with what the Commission sees as unrealistically high assumptions on growth, still puts Rome on a collision course with the Commission, which is to give an opinion on the revised draft on Nov. 21.
Privatization - Plan - Spending - Overshoots - Government
“While boosting its privatization plan and committing to mitigate spending overshoots, the Italian government did not change its deficit targets. This will likely lead the European Commission to recommend an infringement procedure,” Morgan Stanley economist Daniele Antonucci said.
EU fiscal rules require highly indebted governments such as Italy to cut their structural deficit and debt every year.
Commission - Rules - Option - Steps - Rome
The European Commission, which enforces the rules, had the option of starting disciplinary steps against Rome for not lowering its debt fast enough in the previous...
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