November 12, 2018 / 4:39 PM / a month ago

Germany's Scholz sees Italy taking steps to resolve budget row

BERLIN (Reuters) - German Finance Minster Olaf Scholz said on Monday he expected Italy to take steps to resolve a row with EU authorities over its 2019 budget and he was a “quite optimistic” about a solution to the dispute.

FILE PHOTO: German Finance Minister and vice-chancellor Olaf Scholz attends the weekly cabinet meeting in Berlin, Germany August 1, 2018. REUTERS/Joachim Herrmann/File Photo

The European Commission rejected the draft fiscal plan last month and has threatened to impose penalties if it is not revised to conform with EU regulations - something Rome has indicated it is unwilling to do.

The Commission has given Rome until Tuesday to present a new budget and could start disciplinary steps against Rome later this month.

Scholz said nobody would demand the Italian government pursue a policy of austerity.

“(But) whoever has 130 percent of their GDP in debt must act more cautiously than someone who is in a different position,” told the foreign press association in Berlin.

“I expect the Italian government will take the necessary decisions that make it possible to avoid getting into difficulties...We are quite optimistic that in the end there will be a good solution.”

Scholz said that with positive economic data in many regions “it would be wrong to say one can’t look positively into the future”, but that the economic outlook was also marked by geopolitical risks.

Turning to Brexit, he said no country in Europe would escape unharmed from a no-deal British exit from the European Union but that Britain would suffer most.

“A hard Brexit would cause large economic upheaval, above all of course in the United Kingdom but no one would escape free,” Scholz said.

“Most European countries could withstand this well but there would be consequences and for Britain that would definitely be the worst option,” he added.

British Prime Minister Theresa May’s Brexit strategy came under attack from all sides on Monday, increasing the risk that her plan for leaving the EU will be voted down by parliament and thrust the United Kingdom toward a potentially chaotic “no-deal” Brexit.

In a sign that Brexit talks could go down to the wire, EU sources said they want clarity from London by the end of Wednesday at the latest if there is to be a summit this month to approve a Brexit deal.

May’s compromise plan, which seeks to maintain close trade ties with the EU in the future, is facing opposition from Brexiteers, pro-Europeans, the Northern Irish party that props up her government, and even some of her own ministers.

She must first seal a deal with the remaining 27 members of the EU before British lawmakers can approve - or reject - it.

“We are doing everything to achieve an agreement,” Scholz said. “We regard that as right and necessary.”

Reporting by Paul Carrel and Thomas Escritt; Editing by Michelle Martin and John Stonestreet

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