Italy claims its budget plans won’t hurt the EU’s financial wellbeing
Italy’s expansionary budget will not risk the EU’s financial health, the country claimed today as it seeks to counter Brussels’ criticism of its latest spending plans.
Economy minister Giovanni Tria wrote to the European Commission to say that the public spending outlined in Italy’s budget are crucial in order to kick start economic growth in the country.
It comes after the Commission slammed Italy’s proposals last week as “unprecedented” as investors started a sharp sell-off of Italian debt.
While Tria admitted the budget wasn’t in line with the EU’s Stability and Growth Pact, he added that Rome must take “hard but necessary decisions” to improve growth in one of the eurozone’s largest economies.
He also said the government would "take all necessary measures to ensure that the objectives set are strictly respected".
The Commission is expected to demand Rome re-draft its budget tomorrow, giving it three weeks to do so.
It comes after Italian bonds received a boost from a better-than-expected downgrade by credit rating agency Moody's last week.
Moody's cut Italy to one step above its so-called 'junk' rating, citing concerns about its fiscal strength and ability to reform its economy.
Giving Italy a rating of Baa3, and moving the country's outlook to 'stable', Moody's decision saw bonds rebound before their rally slowed down on Rome's defiant stance over its budget.
Investors had been selling bonds of Italian debt amid the tensions between Italy and the EU, with the yield for Italian debt compared to German bonds climbing to their highest levels in five years.