January 22, 2019 / 4:12 AM / 2 months ago

Italy's Tria sees risks from IMF policies, defends deficit-spending

BRUSSELS (Reuters) - Italian Economy Minister Giovanni Tria said on Monday that the International Monetary Fund’s economic policies, not Italy’s,. posed a risk to the global economy.

Italian Economy Minister Giovanni Tria attends a eurozone finance ministers meeting in Brussels, Belgium January 21, 2019. REUTERS/Francois Lenoir

Earlier on Monday, the IMF cut its global economic forecasts, citing Italy as one of the main risks to growth because of deficit-spending plans that have worried investors.

But Tria retorted that it was the IMF’s policies that were risky.

“Italy does not pose a risk for the European and the global economy,” he said, insisting that deficit spending was the right policy to pursue in the current economic cycle.

On the other hand, he said that following IMF and European Commission recommendations to build financial buffers against economic turmoil could actually create an economic crisis.

“This is a fundamental mistake,” he told a news conference in Brussels after a meeting of euro zone finance ministers.

At the meeting, the Dutch minister asked the European Commission why it had put on hold disciplinary proceedings against Italy over its planned budget deficit for 2019, EU sources said.

Rome is targeting a 2 percent deficit this year, mostly to boost welfare and pension spending. Tria said investment should be prioritised ahead of limiting the deficit and debt, and that the growth it generated would bring down the national debt.

Italy’s public debt is more than 130 percent of its gross domestic product, the highest ratio in the EU after bailed-out Greece.

Tria insisted that Rome’s economic forecasts had anticipated a slowdown in Italy caused by a global downturn and by weakness in the German economy.

Rome had initially forecast that its economy would grow 1.5 percent this year, but revised this down to 1.0 percent after prolonged talks with the Commission over its 2019 budget. The IMF has forecast Italian growth of 0.6 percent this year.

Tria said the government was monitoring the situation and could always revise its forecasts, but that Italy’s finances were solid and no additional cuts or revenues would be needed this year, “even in the event of a worsening downturn”.

He added that investment and “blocked” public projects needed to be speeded up - possibly a reference to an EU-funded high-speed rail connection between Turin and Lyon in France, known as TAV.

Rome has suspended the project because the 5-Star Movement, part of the coalition government, has raised doubts over its economic benefits.

Reporting by Francesco Guarascio; Editing by Kevin Liffey

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