BRUSSELS (Reuters) – Senior euro zone officials preparing meetings of euro zone finance ministers supported this week the European Commission’s decision to reject Italy’s draft budget for next year, a senior EU official said on Friday.
The debate was held in preparation of the monthly meeting of euro zone finance ministers scheduled on Nov. 5 which will discuss the Commission’s rejection, the official said, adding he expected the ministers will endorse the envoys’ position on the Italian budget.
Under EU rules, Italy is required to send a revised version of the draft to Brussels by Nov. 13 and it should envisage a cut in the structural budget deficit, which excludes one offs and cyclical swings, of 0.6 percent of GDP.
The rejected budget assumed an 0.8 percent increase, rather than cut, in the structural deficit.
The official declined to comment on whether some governments expressed support to the Italian plan, but other senior officials involved in the process said Italy was isolated and all the other 18 euro zone countries backed the Commission.
The Italian government has planned a free-spending deficit which includes a cut in the retirement age, welfare handouts and tax cuts to meet election pledges and wants to finance that through higher borrowing
This worries its euro zone peers, because at 133 percent of GDP, Italy has the third highest public debt in the world after the United States and Japan and euro zone officials are concerned financial markets may lose confidence in Rome, which could trigger another sovereign debt crisis, very costly to all.
(Reporting By Jan Strupczewski and Francesco Guarascio)