Salvini defiant over budget despite EU giving Italy three weeks to come up with new plan

Agence France-Presse
Italian Prime Minister Giuseppe Conte claims the rejected budget would stimulate growth - Bloomberg

Far-right Deputy Prime Minister Matteo Salvini on Tuesday insisted Italy would stick to its budget despite the European Commission rejecting it for increasing the deficit, Italian media reported.

"This doesn't change anything, let the speculators be reassured, we're not going back," League head Salvini said in Bucharest.

"They're not attacking a government but a people. These are things that will anger Italians even more and then people complain that the popularity of the European Union is at its lowest," he told journalists.

The European Union's executive arm earlier Tuesday rejected Italy's proposed 2019 budget and asked for a new plan, a first in European Union history, according to a source..

Italy's government said it would stick to a deficit of 2.4 per cent of annual economic output next year, which would be triple the amount forecast by the previous government and approach the EU limit of 3.0 percent.

The proposed budget would also aggravate Italy's already huge debt mountain, at some 130 percent of gross domestic product (GDP), way above the EU's 60-per cent ceiling and second only to Greece's in Europe.

Italy now has three weeks to revise its budget, under EU rules.

Giuseppe Conte at a foreign press club press conference on Monday Credit: Gregorio Borgia/AP

The Commission, the executive arm of the 28-nation EU, reviews the budgets of the 19 eurozone economies to check for compliance with its deficit and other standards.

European Economics Commissioner Pierre Moscovici will ask Italy's populist government on Tuesday to "revise its budget," which exceeds EU limits, the source told AFP on condition of anonymity.

The source said the decision was taken by the 28 commissioners during a meeting in Strasbourg, France. Italy now has three weeks to revise its budget under EU rules.

The coalition government of the anti-establishment Five Star Movement (M5S) and anti-immigrant League has said it would reduce total debt to 126.5 percent in 2021.

Giuseppe Conte speaking during an interview on Tuesday Credit: Alessia Pierdomenico/Boomberg

Italian Prime Minister Giuseppe Conte told journalists on Monday that the budget is designed to spur growth and avoid a recession.

"We want a dialogue with European institutions in a spirit of faithful collaboration and constructive dialogue," he said.

In its four-page letter to the European Commission, Italy's government admitted its budget was "not in line with the norms of the stability and growth pact" governing EU member state public finances.

"It was a difficult decision but necessary given the delay in achieving pre-crisis GDP levels and the dramatic economic situation of the most disadvantaged in Italian society," the letter said.