June 11, 2019 / 5:29 AM / a year ago

Italy's coalition to work to avert EU disciplinary action over budget: PM's office

ROME (Reuters) - Italy’s coalition leaders have agreed to work together to avert European Union disciplinary action over Rome’s worsening public finances after a late-night meeting with Prime Minister Giuseppe Conte on Monday, the prime minister’s office said.

Italian Prime Minister Giuseppe Conte looks on as he holds a news conference at Chigi Palace in Rome, Italy, June 3, 2019. REUTERS/Remo Casilli/Files

In a statement published overnight, Conte said he and his two deputies - League leader Matteo Salvini and 5-Star Movement head Luigi Di Maio - would meet with Economy Minister Giovanni Tria and his staff to draw up a strategy to avoid an infringement procedure.

Officials from the 28 EU states will meet on June 11-12 and are expected to say an EU disciplinary procedure against Italy over its 2.3 trillion euro ($2.6 trillion) debt is warranted.

“All’s well, it was a good meeting. Our shared goal is to avoid the infringement while safeguarding economic growth, employment, as well as tax cuts,” Salvini said in a statement after the coalition meeting.

“There won’t be any budget correction nor tax increases.”

Rome’s debt has been rising steadily from a pre-crisis low of 104% of domestic output in 2007 and now stands at 132% — second only to Greece’s within the euro zone.

Market concerns have been heightened by the spending plans of the eurosceptic government which took office a year ago.

Emboldened by the League’s strong showing in last month’s European election and local polls across Italy, Salvini has made tax cuts a priority for the government and has repeatedly taken aim at Brussels, demanding an overhaul of EU fiscal rules.

However, Conte has made clear he does not want a confrontational approach in the looming EU talks and has threatened to resign if the two coalition leaders fail to reach a compromise to settle the budget tussle with Brussels.

Both Di Maio and Salvini have expressed confidence that Rome would reach an accord with the EU, but have made clear that the government had to stand up to the European Commission.

“We will need a dialogue with Europe, but also a firm stance. I’m not interested in fighting with the EU but we must get the results which Italians are interested in,” Di Maio told RTL 102.5 radio on Tuesday.

Rome is also scrambling to avoid a sales-tax increase worth 23 billion euros, which is due to kick in automatically next year unless the money can be found from other quarters.

Both coalition parties have ruled out a sales tax hike, but have yet to spell out where they will find the financial cover.

“Italy has got all it takes, strategically and politically, to get to a 2020 budget that must raise salaries and cut taxes,” Di Maio said.

Reporting by Giselda Vagnoni and Valentina Za; Editing by Kirsten Donovan and Crispian Balmer

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