June 7, 2019 / 3:15 PM / 3 months ago

EU governments prepare to back Brussels over Italy debt procedure

FILE PHOTO: A man walks past the European Commission Headquarters, in Brussels, Belgium May 28, 2019. REUTERS/Yves Herman

BRUSSELS (Reuters) - An EU disciplinary procedure against Italy over its debt is warranted, according to a draft document for a meeting of EU government officials quoted by an EU source, setting the stage for an escalation of a dispute with Rome.

Officials from the 28 European Union states will meet on June 11-12 to adopt the document, which could still be subject to change.

It confirms the EU Commission’s assessment that Italy’s growing debt is in breach of EU fiscal rules. “A debt-based EDP is thus warranted,” the EU source said on Friday, citing the document and referring to the bloc’s excessive deficit procedure (EDP), which can lead to financial penalties.

Officials could also say that the Commission should take into account “any further elements which may emerge,” the source said, meaning that if Italy made new fiscal commitments the procedure could be averted.

In Rome, two senior members of Italy’s governing coalition told Reuters recent data suggested this year’s deficit would be below the Commission’s forecast of 2.5% of gross domestic product and could beat the 2.04% agreed with Brussels in December.

Rome and Brussels have been at loggerheads over debt and deficit levels since shortly after Italy’s euroskeptic coalition took office in June 2018 and, if approved, the EDP document would mark a stepping-up of the row.

The Commission would then need to recommend the beginning of the procedure which, if backed by the bloc’s finance ministers, could be launched in July.

A procedure could also expose Italy to higher costs to service a debt that stands above 130% of GDP.

Reporting by Francesco Guarascio @fraguarascio; editing by Philip Blenkinsop

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