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EU urges Italy to reduce fiscal gap, threats sanctions procedure
February 22, 2017 / 11:43 AM / 7 months ago

EU urges Italy to reduce fiscal gap, threats sanctions procedure

BRUSSELS, Feb 22 (Reuters) - The European Commission warned Italy on Wednesday it could launch a sanctions procedure over the country’s growing debt if Rome did not by the end of April adopt new belt-tightening measures worth at least 0.2 percent of its gross domestic product.

The move puts further pressure on the Italian government led by the centre-left to adopt unpopular measures as the country possibly faces early elections this year while eurosceptic forces are on the rise.

But the EU executive commission had little room for leniency as Italy is set to increase its huge public debt despite obligations to cut it.

The latest round of Commission economic forecasts for the 28-nation bloc showed Italy’s public debt would rise to an all-time high of 133.3 percent of gross domestic product this year from 132.8 percent in 2016.

EU rules say Italy should instead reduce its debt by about 3.6 percent of GDP annually.

Publishing a report on Italy’s debt, the Commission confirmed that the country needs to “credibly” enact additional measures worth at least 0.2 percent of its GDP by the end of April.

The request follows a letter sent to Rome in January urging further measures to reduce its structural deficit, which excludes the impact of the business cycle and one-offs. This would in turn see its debt fall.

Rome has already committed to adopt new measures. The new warning is meant to put pressure on Italy to deliver on its promises.

A disciplinary decision would only be taken, a Commission’s note said, after Brussels has all data available for its next economic forecasts, which are expected in May.

A sanction procedure could end up with hefty fines, although this has so far never happened. It would, however, send a warning to markets which have already started to ask higher yields for Italian bonds. (Reporting by Francesco Guarascio; editing by Philip Blenkinsop)

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