Euro falls ahead of crunch deadline over Italy’s budget plan

The euro has fallen ahead of a crunch deadline for Italy to revise its rejected budget plan.

Italy's finance minister Giovanni Tria is reportedly set to revise the budget's growth forecast to reach a compromise with the European Commission.

But the currency has dropped 0.6 per cent against the dollar to $1.126, led by a fall in the pound as well as political uncertainty.

The Italian government has until tomorrow to submit a revised draft budget plan to the European Commission in a deadline imposed by the bloc.

It could begin disciplinary measures, which could eventually include fines, against Rome later this month if a new budget meeting its rules does not come forward.

The commission rejected Italy's budget plan last month and said its breached EU rules – its first rejection of a member state's fiscal plan.

The EU said government spending was too high and the deficit would rise instead of fall and debt would not fall in line with EU rules.

Last week the commission produced its own economic forecast, which contradicted Italy's predictions contained in its budget.

The commission predicted Italy's budget would push its deficit to 2.9 per cent of GDP in 2019, rather than the 2.4 per cent estimated by Rome, and that it would rise to 3.1 per cent in 2020 against Italy's 2.1 per cent estimation – above the bloc's limit.

Its forecast of 1.2 per cent GDP growth in 2019 was also lower than Italy's 1.5 per cent.

Italian newspaper La Repubblica reported that Italy could now revise its GDP growth forecast for next year to one per cent, citing a government source, while another newspaper, Il Messaggero, said it would be cut to 1.2 per cent.